When Is It Ok To Spot Check?

When is it ok to spot check? The answer is “it depends on the situation” but in my opinion, there should be an assumption that comprehensive detail reviewing always takes precedence over spot checking barring specific unusual circumstances.

The purpose of comprehensive detailed reviewing is to catch errors in the draft work-product. In many cases, spot-checking is insufficient to achieve this objective. Also, the difference between a “comprehensive review” and “spot checking” is often only 10 to 15 more minutes. That said, uncaught mistakes that survive too long can cause damage, as it can negatively impact many people, resulting in damaging the integrity of the preparer and/or reviewer.

Spot checking is sometimes ok when employed as a subset of a comprehensive double-check, but risky as a stand-alone review method.

Spot checking should be limited to the following:

  • In cases where there are two reviewers, and reviewer #2 trusts both the preparer’s ability and the primary reviewer’s review process, then reviewer #2’s review can be high level and include spot-checking (as the work product has already been detail reviewed).


  • Low-risk tasks like the review of intangible asset amortization. For example, in cases where there have been no new business combinations in years and the intangible amortization is the same each month, the review can be scaled down to a spot check. For example, intangible amortization was running at $600K per month historically and continuing to run at $600K in the current month. However, accountants should still should also employ a mental checklist that validates (i) no new business combinations creating new intangible assets occurred, (ii) no new impairment triggering events occurred and (iii) no intangible assets reaching their full useful life in the current or prior month.


Also, sample spot checking is ok within a comprehensive detailed review. For example, when reviewing quarterly stock-compensation expense in cases where there have been hundreds/thousands of life-to-date grants, sampling 20 out of 1,000 grants for re-calculation (including the 10-15 largest grants) is usually ok provided other comprehensive checks have occurred such as (i) confirming all new grants are accurate including (a) shares granted, (b) terms, grant price, etc. (ii) confirming terminations have been properly accounted for and tied out, (iii) completeness via a option/share roll forward and (iv) confirming the consolidated quarterly stock-compensation expense is in line with the budget/expectations, etc.

When detail reviewing a work product on a spreadsheet, schedule out your review procedures and ensure to address (i) completeness, (ii) the output makes sense from a high-level (i.e. numbers fall within a reasonable range), (iii) ensure numbers and balances tie out to relevant supporting schedules (tie out validations), (v) check consistency of relevant balances throughout the product (like APIC on balance sheet equals APIC on equity roll forward…relationship validations), (vi) validate that all calculation functions are being performed correctly via recalculating (recalculation validations).

Lastly, make sure your subordinates are aware that spot-checking as a stand-alone review method can be risky and to opt for comprehensive reviewing.

In conclusion, all reviews should incorporate a comprehensive element and spot-checking in lieu of detail checking is risky.

For more information on double-checking, see http://www.pm4secr.com and consider purchasing a copy of the “Industry Accountant’s Intelligence Briefing” through Amazon at:


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