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Why Audit Clients Need a Software Solution

As an auditor, it's worth your time to warn clients that the traditional Excel approach won't work with the complex requirements of ASC 842. Any cost savings will be outweighed by the drawbacks.

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Welcome back to my auditor's guide series. Last week, I discussed why it’s prudent to use a software solution like NetLease for Auditors to audit leases under ASC 842. In short, it’s very difficult to scale a homebuilt solution to handle the large volume of leases auditors will need to analyze. 

Now, let’s look at how the client side of lease accounting affects the audit.

I think it is worth your time as an auditor to warn clients that the traditional Excel approach won't work with the complex requirements of ASC 842. Any cost savings they achieve will be outweighed by the drawbacks. On the other hand, convincing your clients to implement a software solution has downstream benefits for both your client and your audit staff. 

For auditors: 

Risks of clients using Excel 

  • Need to reverse-engineer client spreadsheets and calculations 
  • Modifications, terminations and other lease adjustments are prone to error 
  • No journal-entry automation 
  • No reporting available
  • Benefits of clients using a software solution like NetLease 
    • Provides system-generated amortization schedules that require the client to think through the complete list of inputs required for accurate accounting 
    • Provides system-generated journal entries, including modifications and terminations 
    • Provides complete disclosure reporting  
    • Creates a central repository for lease documents  
    • Simplifies audit procedures 
      • Incentivizes loyalty to the auditor because the next audit is simplified 

For audit clients

Risks of using Excel 

  • Complexity grows out of control if leases have any special conditions 
  • Difficult to perform at scale  
  • Each lease needs its own amortization schedule 
  • Prone to inaccuracy 
  • Audit risk and ongoing accounting confusion 
  • Difficulty performing modifications and ROU impairments 
  • Time consuming 
  • Benefits of a software solution like NetLease 
    • Improved accuracy and efficiency of lease accounting operations 
      • Modifications 
      • Terminations 
      • Journal entries 
      • Disclosure reports 
    • Saves time and resources with automation 
    • Simple reporting for better decision-making throughout the lease lifecycle 
    • Auditor requests will be greatly reduced as they can directly access the client information  

What is NetLease? 

NetLease is a mature software solution for lease accounting built specifically for the new standards. It works hand-in-glove with our auditing tool, NetLease for Auditors, to simplify lease auditing and streamline accounting for your clients. Once a client is set up in NetLease for Auditors, they can continue using NetLease as their complete lease accounting solution without re-entering the lease details. If they have 3 or fewer leases, they can continue to use NetLease indefinitely for free. 

For more details on the benefits of NetLease for Auditors, see my previous post

Both NetLease and NetLease for Auditors are implemented and supported by CPAs and former auditors with many years of lease accounting experience, and expertise designing and developing accounting software. We show you how the calculations work so you can trust the system to eliminate accuracy risk.  

Bottom line: Eliminate the complications and unknowns of auditing leases this year by encouraging your clients to use a software solution when they adopt ASC 842. Helping your clients see the value of lease accounting software will make their lives easier, make your audits of a high-risk area simpler and show clients that you have their best interests in mind. Getting lease accounting right with your audit clients will help build lasting relationships that will bring them back year after year. 

For more information on automating your lease accounting, schedule a conversation with one of our CPAs