Earmark Team

AI Can Prepare the Work, but Humans Still Own the Risk

Earmark Team · October 1, 2026 ·

An off-the-shelf AI agent opened two general ledgers, compared the balances with prior-year returns, built book-to-tax workpapers in Excel, and entered two business returns into TaxAct. It even found and corrected errors in the tax software.

The process took a few hours. Yet the most important step was still human. Blake Oliver downloaded the final returns, checked them against the general ledger, and transmitted them himself.

The tension between machines doing the work and people remaining accountable runs through Episode 504 of The Accounting Podcast. Blake and co-host David Leary discuss agentic tax preparation, AI-native ledgers, flawed do-it-yourself cost segregation studies, accounting salaries, staffing, and failures of judgment at the Big Four.

AI Is Moving From Research Assistant to Tax Preparer

Last year, Blake mainly used AI as a research partner. This year, he gave Claude Cowork a much larger role in preparing two returns: his S corporation, which uses Xero, and Earmark Media’s partnership, which uses QuickBooks.

Claude pulled the profit and loss statement, balance sheet, and trial balance for each entity. It then compared those reports with the prior-year returns. The S corporation tied out, but the QuickBooks file didn’t. Claude traced the problem to a dropdown issue that caused reports to run on the accrual basis even though they appeared to be set to cash basis.

After resolving the mismatch, Claude asked Blake about book-to-tax adjustments and built Excel workpapers. It then opened TaxAct Business, completed the interview, entered the data, and worked through the software’s error checks.

The agent also found several problems. TaxAct omitted fully nondeductible entertainment expenses from its calculation, so Claude created a custom Schedule M-1 add-back. It corrected distributions that had defaulted to zero, fixed ending retained earnings so Schedule L balanced, removed an incorrect name-change selection, and addressed an Arizona filing checkbox that kept resetting.

David described the workflow as using AI to “bridge the gap between the GL and the tax return.” Blake estimated active agent time at about an hour per return.

That experience raises the question: if AI can connect the books and tax return, will those systems eventually become one platform?

AI-Native Ledgers Could Change the Technology Stack

David pointed to Accrual, an AI tax platform, agreeing to acquire Puzzle’s accounting-firm business and technology. General Catalyst backed both companies, so David viewed the deal as a possible combination of related investments.

Blake saw practical value in the pairing. Puzzle’s AI works within Puzzle, but accounting firms can’t move every client away from QuickBooks, Xero, and other ledgers. Accrual can let agents work across existing systems while providing a tighter experience with its own ledger.

A livestream discussion also raised the possibility of pairing AI with an open-source ledger. For basic write-up work, an accountant might give an AI tool a year of bank statements, create an import file, and avoid paying for features the client doesn’t need. Blake and David treated this as an idea worth testing rather than a proven replacement for established systems.

But the limits of general-purpose AI are clear when the work demands specialized evidence.

Polished Output Isn’t Defensible Work

Blake cited an Accounting Today article by Heidi Henderson of Engineered Tax Services. Over six weeks, three prospective clients brought her firm cost segregation studies created with ChatGPT or Google Gemini and asked the licensed engineering firm to validate them.

One Gemini spreadsheet contained six rows and assigned $100,000 of bonus-eligible basis to a $400,000 property. A ChatGPT workbook reclassified $1.24 million of a $4.7 million athletic facility to shorter-life assets.

Measured against 13 principal elements in the IRS audit technique guidelines, the ChatGPT study satisfied one, and the Gemini study satisfied none. They lacked items like a stated methodology, an engineer of record, engineering takeoffs, reconciliations, and required statutory analysis.

Blake argued that a specialized model trained on a firm’s methods and IRS guidance might prepare parts of a report. It still couldn’t perform the site visit, take photographs, or provide an expert’s sign-off. General-purpose tools, he warned, can “BS their way through it” and produce weak work that looks convincing.

That makes experienced review more important, but the profession may not be investing enough in the people who provide it.

Firms Need People Who Can Challenge the Machine

EY plans to distribute $100 million in bonuses tied to “human skills,” including adaptability, innovation, and judgment. Awards can reach $25,000 for material contributions, including team awards.

David viewed the program as paying employees to remain the human in the loop. Blake called it a smart way to align staff incentives with firm risk. Both hosts noted that all four Big Four firms have faced problems involving fabricated AI citations in published reports.

Yet median entry-level accounting pay fell from $75,000 to $73,000 even as compensation rose overall. David warned that firms especially need seniors and managers. These are the people who “watch the agents.” Lower starting salaries could weaken the future supply of those experienced reviewers.

Accountability Still Reaches the Top

KPMG Australia cut 360 employees and 27 partners after consulting revenue fell nearly 17%. The cuts follow allegations involving client data leaks, confidential client information used to win new work, and poor whistleblower investigations.

“Accountants will lose their jobs if people at the top-end management level are not doing ethical things, or if the firm’s culture is not ethical,” David said, pointing out the consequences.

Deloitte, meanwhile, agreed to pay $21.5 million to settle Justice Department allegations involving race- and sex-based employment practices on federal contracts. Deloitte denied the allegations and admitted no liability. A Hong Kong court also refused to dismiss PwC International from the Evergrande liquidators’ multibillion-dollar lawsuit, although the ruling didn’t decide the cases’ merits.

Technology changes how quickly work gets done, but it doesn’t change who must answer for the result. To benefit from AI, firms need to know how to direct it, test it, and take responsibility for its output.

Listen to the full discussion in Episode 504 of The Accounting Podcast.

How to prove your quality control system works under PCAOB QC 1000

Earmark Team · September 29, 2026 ·

The manual is thick. The policies are complete. A partner oversees independence, the firm conducts an annual inspection, and every process has a sign-off page. On paper, the firm appears to have quality under control.

Then the same inspection finding returns for the third year.

“We fix the documentation, we don’t fix the problem,” Meredith Mednick, CPA, CA, says in a recent episode of Standard Practice.

PCAOB QC 1000 is designed to address that recurring failure. Effective December 15, 2026, the standard replaces the PCAOB’s interim quality control framework with a risk-based system. Firms must do more than maintain policies. They must show their responses address real risks and work as intended.

Start with risk, not the quality manual

The PCAOB adopted its interim quality control standards in 2003 from AICPA standards that predated the Board. Those standards created a useful baseline, but they were largely prescriptive and static: establish policies, document them, and update them when needed.

They didn’t require a system that learned from its failures. Inspection findings continued to show supervision problems, independence gaps, and weak evidence over complex estimates, even when firms had policies and training in place.

QC 1000 replaces that model with a three-step process:

Establish quality objectives: What should good quality look like at this firm?
Identify and assess quality risks: What could keep the firm from reaching those objectives?
Design quality responses: What targeted actions will reduce those risks to an appropriately low level?

Firms must assess quality risks annually and respond when their circumstances change. A new industry, merger, technology platform, or loss of key personnel may change the firm’s risk profile.

In Meredith’s example, the fictional Clearview Audit Group adds 12 healthcare issuer clients. That growth introduces risks involving revenue recognition, regulation, and specialists. Clearview must update its quality responses before issuing its first healthcare audit report.

“The manual is the output,” Meredith explains. “The risk-based analysis is the input.”

That analysis supports the standard’s central goal of providing reasonable assurance that engagements follow professional and legal requirements and that reports are appropriate in the circumstances.

Eight components must work together

The risk assessment process feeds eight integrated components:

Risk assessment
Governance and leadership
Ethics and independence
Acceptance and continuance
Engagement performance
Resources
Information and communication
Monitoring and remediation

These aren’t separate checklists. A staffing problem can affect engagement performance. A weak reporting culture can undermine monitoring. Outdated technology can create risks across the system.

Governance makes that integration personal. The firm’s principal executive officer, the highest-ranking executive regardless of title, is ultimately accountable for the QC system. Firms must also name one person with operational responsibility for each of three areas: the overall QC system, ethics and independence, and monitoring and remediation. One person may hold several roles, but each role must have one owner.

Firms that issued reports for more than 100 issuers during the prior year must also provide confidential, anonymous channels for complaints and allegations. As adopted in 2024, the standard also required these firms to establish an external QC function to evaluate significant judgments in the annual QC assessment, but the PCAOB voted in September 2026 to rescind that requirement, subject to SEC approval.

Daily audit decisions become quality-control decisions

The standard goes beyond firm leadership. It changes decisions made before and during an engagement.

Independence is an active process. Firms must maintain restricted-entity lists and communicate additions at least monthly. Personnel review them at defined trigger points, such as joining the firm, acquiring an investment, changing roles, or entering a business relationship. The standard requires ethics training near the start of employment and at least annually. Firms above the 100-issuer threshold must automate the process for identifying investments that may impair independence.

Client continuance becomes a quality filter. Firms must consider the integrity and ethical values of management and the audit committee, not only whether the firm has the skills to perform the work. They also need a documented response when they discover, after accepting or continuing an engagement, information that would have caused them to decline it.

Resources include time and technology. Engagement teams need competence, objectivity, and enough time to do the work. AI-assisted tools and third-party platforms must also have suitable capacity, reliability, resilience, and security. Methodologies and templates must be current and used in practice, not left as “wallpaper” on the intranet.

These engagement-level decisions feed the system’s most important feedback loop.

Root-cause analysis must lead to a tested fix

QC 1000 requires engagement monitoring and system-level monitoring. At minimum, firms inspect one completed engagement for each engagement partner on a cyclical basis. Selection must include unpredictability. Firms above the 100-issuer threshold must also monitor in-progress engagements.

When monitoring identifies a QC deficiency, the firm must determine why it happened. Was the cause inadequate training, poor staffing, outdated methodology, weak supervision, failed technology, or a culture that discouraged questions?

The response must address that cause. In the Clearview example, deficiencies involving estimates appear across three issuer audits. Root-cause analysis shows that the firm’s methodology was not updated after the estimates standard changed. The answer is not another generic training session. Clearview must update the methodology, train its people, and monitor later engagements to confirm the fix works.

Work backward from September 30

Each year, firms evaluate their QC systems as of September 30 and reach one of three conclusions: effective with no unremediated deficiencies; effective except for deficiencies that aren’t major; or not effective because major deficiencies exist.

The firm reports its conclusion to the PCAOB on nonpublic Form QC by November 30. The principal executive officer and the person responsible for the QC system certify the filing. The firm must assemble its final QC documentation by December 14 and retain it for seven years. Since we recorded, the PCAOB adopted targeted amendments on September 9, 2026. If the SEC approves them, they would take effect with QC 1000 on December 15, 2026, let each firm choose its own annual evaluation date instead of September 30 (with Form QC due within 60 days after that date), shorten documentation retention to five years, and allow the specified QC roles to be divided among several people or assigned to non-firm personnel.

To prepare, firms should:

Conduct a real gap analysis across all eight components
Assign and communicate accountability roles now
Make monitoring support root-cause analysis, not just list findings
Schedule required work by counting backward from your evaluation date
Map existing ISQM 1 or SQMS 1 programs to QC 1000’s distinct requirements
Track SEC approval of the targeted amendments the PCAOB adopted on September 9, 2026

A thick manual can’t prove audit quality. A working system can. Listen to the full Standard Practice episode to hear Meredith’s complete walkthrough and consider which part of your firm’s QC system needs attention first.

On September 9, 2026, the PCAOB adopted amendments to QC 1000, three months before they take effect. This is a companion to episode two, PCAOB QC 1000, A Firm’s System of Quality Control, covering the recent changes.

IFRS 18 changes the story your income statement tells

Earmark Team · September 29, 2026 ·

Two companies operate in the same industry, under similar conditions, in the same year. One includes share-based payment expense in operating profit; the other excludes it. One includes a goodwill impairment; the other presents it below that line. Both comply with IFRS, yet investors end up “comparing apples to oranges,” Blake Oliver, CPA, said on an episode of Standard Practice.

IFRS 18 was created to address that problem. Host Meredith Mednick, CPA, CA, walked through the new standard with Blake. His first reaction to replacing IAS 1 fell “somewhere between mild panic and deep curiosity.”

Issued in April 2024, IFRS 18 applies to annual periods beginning on or after January 1, 2027. It doesn’t change when companies recognize transactions or how they measure them. Instead, it changes how they present and disclose financial performance. That may sound limited, but the implementation work isn’t.

Operating profit gets a standard foundation

Under IAS 1, companies had broad discretion over how they classified income and expenses and the subtotals shown above profit or loss. Most presented operating profit, but there was no standard definition of what belonged in it.

IFRS 18 introduces five required categories for income and expenses:

Operating
Investing
Financing
Income taxes
Discontinued operations

Operating is the residual category. You first ask whether an item belongs in one of the other four categories. If it doesn’t, it is operating. As Blake explained, “If it doesn’t meet the criteria for another category, it’s operating, full stop.”

That means a company can’t remove a cost from standardized operating profit simply because it is large, volatile, or unusual. For example, restructuring costs remain in operating even if management considers them one-time charges. A gain or loss on production machinery also goes to operating, although the related cash proceeds may appear in investing activities under IAS 7.

That distinction is important because the investing and financing categories under IFRS 18 don’t match the categories with the same names in the cash flow statement.

Classification follows the economics

Although IFRS 18 reduces presentation choices, it doesn’t eliminate judgment. Instead, accountants must determine how an asset or liability produces its return or cost.

The investing category includes specified income and expenses from associates, joint ventures, unconsolidated subsidiaries, cash and cash equivalents, and other assets that generate returns individually and largely independently of the company’s other resources. Dividends or fair value gains from listed shares may qualify. Depreciation on a delivery fleet doesn’t qualify because those vehicles work with employees, warehouses, and other operating resources.

The financing category focuses on liabilities. Its treatment depends on whether a liability arises only from raising finance:

Bonds, bank loans, and similar financing arrangements can place several related gains and expenses in financing
Trade payables, leases, pension liabilities, and provisions generally place only separately identified interest and interest-rate effects in financing

For example, current service cost on a defined benefit plan is operating, while separately identified net interest is financing. Foreign exchange differences generally follow the underlying item: FX on a supplier payable is operating, while FX on a bond payable is financing. Limited relief allows operating classification when allocation would require undue cost or effort, but inconvenience alone is not enough.

Once IFRS 18 establishes those general rules, it adds an important exception for certain business models.

Core financial activities may stay in operating

Investing in assets or providing financing to customers may be a company’s main business activity. This can apply to investment entities, investment property companies, insurers, banks, other lenders, and manufacturers that finance customer purchases.

These entities may have to include items that would normally fall under investing or financing in operating. Otherwise, a lender’s operating profit could exclude the interest spread at the center of its business.

This is a fact-based assessment rather than an accounting policy choice. Evidence may include gross-profit-style measures such as net interest income and information reported under IFRS 8. The assessment also occurs at each reporting level. A subsidiary and its consolidated parent can reach different conclusions, creating a need for consolidation adjustments.

Once you settle those classifications, the new statement structure begins to take shape.

New subtotals and disclosures improve comparability

IFRS 18 introduces two key subtotals: operating profit and profit or loss before financing and income taxes. The second combines operating profit with the investing category, allowing users to compare performance before financing costs and taxes.

An exception applies when an entity provides financing to customers as a main business activity and elects to classify in operating the income and expenses from all its finance-raising liabilities, including those unrelated to customer financing. It can’t present a subtotal labeled “before financing” because that description would be misleading.

Companies may still communicate adjusted measures, such as operating profit before restructuring costs. However, qualifying management-defined performance measures used in public communications will require disclosures in the financial statements. Blake described this as bringing non-GAAP measures into the statements “in a controlled and transparent way.”

IFRS 18 also requires the analysis of operating expenses to appear in the statement of profit or loss by nature, function, or a mix. If the financial statements present expenses by function, the footnotes must also disclose key nature amounts, including employee benefits (including share-based payments), depreciation, amortization, impairments, and inventory write-downs, by function. Companies should use labels like “other” only when they don’t have a more informative description available.

These changes lead directly to the most urgent issue of timing.

The practical deadline arrives before year-end 2027

IFRS 18 applies retrospectively. For a company with a December year-end, that means:

They must apply IFRS 18 to their 2027 annual statements
They must restate their 2026 comparative statement
The financial statements must present a reconciliation from the previous IAS 1 presentation
Its first 2027 interim report must already use IFRS 18 headings and subtotals and include the required comparative reconciliation

As Meredith warned, implementation must be “substantially completed before the first interim financial reporting date of the adoption year, not just before the annual year-end.”

Start by assessing main business activities at every reporting level. Then map each income and expense item to a category, identify data gaps, review your expense presentation, inventory externally reported performance measures, and plan the required systems, training, and consolidation changes.

IFRS 18 doesn’t change what a company earns. It changes how clearly financial statement users can understand and compare that performance. For the full classification walkthrough and implementation discussion, listen to the Standard Practice episode.

Three questions every tax firm should ask before new technology touches client files

Earmark Team · September 29, 2026 ·

Grady, the owner of Lighthouse Accounting LLC in the episode’s case study, has a capacity problem. In the previous episode of Tax in Action, he considered hiring employees, outsourcing work, or selling his firm. Now he’s asking, “What if technology could solve the problem?”

New software might automate some of the work. AI might reduce the need for seasonal staff. But adding technology creates its own risks, especially when client information leaves the firm.

In this episode, host Jeremy Wells, EA, CPA, explains why Section 7216 is only the starting point. Tax professionals must also consider the Gramm-Leach-Bliley Act (GLBA), the FTC Safeguards Rule, their written information security program (WISP), vendor oversight, SOC 2 reports, and the professional duties that apply when AI helps perform the work.

Three questions connect these rules:

May we share the client’s information?
Are we protecting it appropriately?
Is a human still exercising professional judgment?

Section 7216 is only the first layer

Section 7216 generally prohibits a tax return preparer from using or disclosing tax return information unless an exception applies or the taxpayer provides written consent.

One exception covers certain “auxiliary services.” Certain disclosures for auxiliary services connected with tax return preparation are permitted without taxpayer consent. These services can include processing, storage, transmission, and software support. But the exception is not blanket permission to share client information with any technology provider. Firms must evaluate the services performed, where information will be disclosed, and the conditions of the applicable exception. Special requirements can apply to overseas disclosures, substantive tax determinations, and certain software-support contractors.

Without that exception, Jeremy notes, firms might be stuck using pencil and paper.

But Section 7216 only governs the use and disclosure of tax return information. It doesn’t tell you whether your firm or the provider has adequate safeguards. And disclosure can include both an intentional transmission and an unauthorized release, such as a data breach or someone viewing client information over your shoulder.

Once you determine that a disclosure is allowed, you must move to protecting the information.

GLBA creates the duty to protect client information

The Gramm-Leach-Bliley Act says financial institutions have an “affirmative and continuing obligation” to respect customer privacy and protect nonpublic personal information. It calls for administrative, technical, and physical safeguards that:

Preserve the security and confidentiality of customer records
Protect against expected threats or hazards
Prevent unauthorized access that could cause substantial harm or inconvenience

GLBA appears in Title 15 of the U.S. Code rather than the Internal Revenue Code. It doesn’t specifically name accountants or tax preparers. Instead, the FTC’s regulations treat tax preparation firms as financial institutions because they engage in financial activities.

That means strict compliance with Section 7216 may not satisfy a firm’s broader information-security obligations. For those requirements, we must look at the FTC Safeguards Rule.

Your WISP should guide your technology choices

The FTC Safeguards Rule, found at 16 CFR Part 314, requires covered firms to develop, implement, and maintain a written information security program. The program must fit the firm’s size and complexity, the nature and scope of its work, and the sensitivity of the information it holds.

A solo practitioner and a national firm with 5,000 employees won’t need identical controls. That is why a generic WISP template isn’t enough. The document must reflect how your firm operates.

A WISP should address areas such as:

Risk assessment and security safeguards
Incident response
Employee training
Vendor selection and oversight
Document retention and secure disposal
Ongoing monitoring and updates

Some specific requirements have a small-firm exception. Firms maintaining customer information concerning fewer than 5,000 consumers are exempt from certain provisions, including the prescribed written incident response plan. They must still maintain a written information security program, and planning how to respond to an incident remains a sound practice.

The firm must also designate a Qualified Individual to oversee and implement the program. That person may work within the firm or for an affiliate or service provider, such as an outside IT firm. If the role is outsourced, the firm retains responsibility for compliance and must designate a senior employee to oversee the outside Qualified Individual. The affiliate or service provider must also maintain an information security program that protects the firm.

These duties apply whether your firm stores records in the cloud or in locked filing cabinets. Paper records still create questions about access, retention, destruction, and oversight of shredding providers.

Most importantly, software should conform to the WISP, not the other way around. Before adopting a new tool, ask what risks it creates, how you’ll manage those risks, who will oversee implementation, and whether you need to update the WISP. Because technology keeps changing, the WISP must be a living document.

That ongoing process also requires firms to evaluate the vendors behind their technology.

A SOC 2 report provides evidence, not certainty

The Safeguards Rule requires firms to take reasonable steps to select and retain service providers capable of maintaining appropriate safeguards, require those safeguards by contract, and periodically assess providers based on their risks and the continued adequacy of their safeguards.

Most firm owners can’t personally inspect a vendor’s servers, personnel, or access controls. A SOC 2 report helps fill that gap. In a SOC 2 engagement, an independent CPA examines controls related to one or more AICPA Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy.

There are two main report types:

Type 1 evaluates the design of controls as of a specified date
Type 2 evaluates both the design and operating effectiveness of controls over a period

A Type 2 report is generally more useful for an established vendor. Still, neither report certifies that a vendor is breach-proof. As Jeremy explains, it is “just one piece of evidence.” Firms should check the report type, the date or period covered, and whether the vendor continues to maintain its controls.

Vendor reports help with oversight, but they don’t transfer accountability away from the firm. The same principle applies when the technology uses AI.

Treat AI like a junior staff member

On June 24, 2026, the IRS Office of Professional Responsibility published OPR Alert 2026-19, its first guidance on artificial intelligence. Although the alert did not amend Circular 230 or create a separate set of AI rules, it explained how existing duties apply to AI-assisted work.

Those duties include due diligence, competence, supervision, written advice, and fees. Practitioners must still review client inputs and firm outputs, understand a tool’s limits, supervise AI-assisted workflows, and ensure written advice meets professional standards.

The alert also cautions against billing for time not actually spent or double billing for AI-assisted tasks, and calls for transparency about AI-related cost savings. Jeremy emphasizes that firms using time- or cost-based billing should review whether their charges fairly reflect those efficiencies under the client agreement.

Jeremy recommends treating AI like a junior staff member, not an unsupervised practitioner or business partner. AI can draft client messages, support research, assist with return preparation, or perform bookkeeping tasks. It can also make mistakes, produce unsupported answers, and tell users what it thinks they want to hear.

Jeremy’s point is that professional judgment and responsibility remain with the human practitioner.

Keep three questions in every technology review

For Grady, choosing technology to expand his firm’s capacity means evaluating more than how much time a tool might save. He needs to establish whether he may share client information, how it will be protected, and who will review the work. The same three questions belong in every firm’s technology review:

May we share the information this way? Apply Section 7216 and determine whether an exception permits the proposed use or disclosure or valid taxpayer consent is required.
Are we protecting it appropriately? Follow a firm-specific WISP and continue monitoring vendors.
Are we still exercising professional judgment? Review the work and take responsibility for the result.

For Jeremy’s complete explanation and the rest of Grady’s case study, listen to Episode 36 of Tax in Action.

How to write audit work papers that still hold up five years from now

Earmark Team · September 29, 2026 ·

Early in her career, Meredith Mednick, CPA, CA, completed an audit procedure, got a result she liked, and decided to document it later.

Later came. The client had moved on, the files had been reorganized, and Meredith’s senior wanted a step-by-step explanation before signing off. Meredith had only a sticky note with a few bullet points and one mysterious abbreviation: “KINV.” She couldn’t reconstruct exactly what she tested, which evidence she reviewed or why the result was acceptable.

That uncomfortable moment frames Episode 4 of Audit Fundamentals, where Meredith points out that your documentation is your audit. Procedures, conversations, and conclusions that live only in your memory can’t support the audit opinion.

Write for the auditor who wasn’t in the room

Audit documentation is the written record of the procedures performed, relevant evidence obtained, and conclusions reached. Each part matters.

The file must show what you actually did, not simply what the audit program instructed you to do. It must include or clearly reference the schedules, confirmations, invoices, bank statements, and other evidence you examined. Finally, every procedure must lead to a conclusion.

This record supports the audit opinion, allows managers and partners to review the work, and gives next year’s team a reliable starting point. It also shows regulators, peer reviewers, and courts that the engagement complied with professional standards.

Under AU-C 230 and PCAOB AS 1215, documentation should allow an experienced auditor with no previous connection to the engagement to understand:

The nature, timing, and extent of the procedures performed
The evidence obtained and results of the procedures
The significant judgments behind the conclusions

Your work paper can’t depend on what your senior already knows or on a conversation from last Tuesday. It must stand on its own.

Give the reviewer enough detail to retrace your work

Once we write for an unknown reviewer, specificity stops looking like busywork.

A heading such as “Revenue testing” provides almost no context. A useful opening identifies the account, assertion, period, objective, population, and sampling method. Meredith offers a stronger example: testing occurrence and cutoff for revenue transactions over $50,000 recorded from December 18 through 31, using 25 randomly selected items from a population of 142.

Procedure descriptions need the same level of detail. “Reviewed inventory balances” is too vague. Instead, explain that you obtained the December 31 inventory summary, agreed it to the trial balance, randomly selected 30 items, located them during the December 28 observation, counted them, compared the results with perpetual records, and tested the roll-forward of activity from December 28 to December 31.

Then organize the evidence so another auditor can follow it:

Identify sampled items by invoice number, date, amount, or another unique detail
Include referenced schedules or clearly cross-reference where they can be found
Define every tick mark in a legend
Connect each supporting document to the procedure and conclusion it supports

A document placed in the file without explanation isn’t useful evidence. It’s clutter.

Show the reasoning, especially when the evidence gets messy

Clear documentation does more than report a clean final answer. It shows how you handled uncertainty and contradictory information.

“Allowance reviewed; deemed reasonable” records a conclusion but not the judgment behind it. For a significant estimate, the file should explain the assumptions evaluated, alternatives considered, information tested, and reasons the team accepted or rejected management’s position.

For example, documentation of a goodwill impairment assessment should cover key assumptions, comparisons with market data or industry benchmarks, sensitivity analysis, testing of the underlying data, and the basis for the conclusion.

Contradictions also belong in the file. If a customer confirmation is $5,000 lower than the recorded receivable, document the difference, your investigation, the evidence obtained, and why you concluded it was a timing difference rather than a misstatement. The investigation is the work.

The same principle applies when management says damaged inventory will sell next quarter or that a related-party receivable is fully collectible. Record how you challenged that explanation and what independent support you examined. As Meredith explains, professional skepticism on the page is intellectual rigor.

Document promptly and protect the record

Good details get harder to capture over time. Under AU-C 230, you generally have to assemble the final file within 60 days of the report release date. PCAOB AS 1215 now allows just 14 days, down from 45, for audits of fiscal years beginning on or after December 15, 2025 (a year earlier for firms that audit more than 100 issuers). Those windows are for assembling the file, not finishing the work: procedures, documentation, and reviews must be complete before the report is released. Once the file is final, nothing can be deleted, and anything you add must record when it was added, who added it, and why; you can’t make additions appear as though they were always present.

Firms generally must retain files for five years for nonpublic audits and seven years for public-company audits. That means today’s work paper may need to speak for you years from now.

Aim to document procedures the same day or the next day. As you work, avoid these common mistakes:

Don’t copy last year’s work paper and merely change the date. Reassess current-year risks and facts.
Don’t describe a procedure without recording its result.
Don’t rely on a client-prepared schedule simply because it foots and ties. Test the completeness and accuracy of its data.
Don’t leave important conversations undocumented. Record who participated, when the discussion occurred, what was said, and how you evaluated it.

Firm templates and review styles may vary, but the professional standard doesn’t.

Treat every work paper as a story

Meredith encourages auditors to think of themselves as authors rather than form-fillers. A strong work paper tells a complete story: what you wanted to prove, what you did, what evidence you examined, what you found, and why the result supports your conclusion.

Before closing a work paper, ask:

Could another auditor understand exactly what I did, found, and concluded without asking me?
Does the file show that I independently evaluated management’s representations?
Would a regulator reviewing it five years from now see that I followed the standards and reached a reasonable conclusion?

If any answer gives you pause, strengthen the file now. Then listen to the full episode for Meredith’s complete examples and guidance. Document your work like it matters, because it does.