Noh Review's Special Edition: Concepts of Auditing

Noh Review's Special Edition: Concepts of Auditing

As requested by some of the subscribers, here is a special edition of Noh Review on Auditing. The following content will summarize the basic concepts of Auditing. For some readers, this may be a great refresher. And for others, this may be a good opportunity to have a taste of some Audit concepts.

What is the difference between Audit and Review?

• Audit is the evaluation and accumulation of audit evidence to see if the audited entity complied with the established criteria. Review is similar in this sense, except that it is less extensive than audit. Review is also less costly than audit because audit provides the most assurance, and review does not go as deep as audit.

Public Accountants' Ethical Dilemma

• Deciding whether or not to overlook a material overstatement of revenues to maintain a good client relationship

What are some of the threats?

• Self-interest Threat: E.g. The client could not pay their fees for the last 2 years, so the Public Accountant created a loan agreement covering the fees, with the client paying 10% interest on the fees.
• Advocacy Threat: E.g. The Public Accountant has been hired to manage the accounting department for 3 weeks while the corporate controller is on vacation.
• Familiarity Threat: E.g. The Public Accountant has been working with the client for 10 years, first as a manger, now as a partner.
• Intimidation Threat: E.g. Management threatens to change auditors if you do not let them overstate accounts receivable by $100,000.

What are the types of Audit evidence?
1) Inspection: E.g. Audit Procedure: Count inventory items and record the amount in the audit working papers. Examine a piece of equipment to make sure a recent purchase of equipment was actually received and is in operation.
2) Confirmation: E.g. Audit Procedure: Obtain a written statement from the client's bank stating the client's year-end balance on deposit.
3) Recalculation: E.g. Audit Procedure: Re-foot entries in the sales journal to determine whether they were correctly totalled by the client
4) Observation: E.g. Audit Procedure: Watch client employees count inventory to determine whether company procedures are being followed.
5) Inquiry of the Client: E.g. Audit Procedure: Obtain information about the client's internal controls by asking questions of client personnel
6) Re-performance: E.g. Audit Procedure: Trace totals from the cash disbursements journal to the general ledger
7) Analytical Procedure: E.g. Audit Procedure: Review the total of repairs and maintenance for each month to determine whether any month's total was unusually large. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year.

What is the difference between Subjective Evidence and Objective Evidence?

Sujective Evidence: E.g. Inquiries of the credit manager about the collectability of non-current A/R

Objective Evidence: E.g. The physical count of securities and cash

General Transaction-Related Audit Objectives:

1) Occurrence: Recorded transactions occurred.
2) Completeness: Existing transactions are recorded.
3) Accuracy: Recorded transactions are stated at the correct amounts.
4) Classification: Transactions included in the client's records are properly classified.
5) Posting and Summarization: Recorded transactions are updated to the master files and are correctly summarized.
6) Timing: Transactions are recorded on the correct dates.

General Balance-Related Audit Objectives:
1) Existence: Amounts included exist at the Balance Sheet date.
2) Rights and Obligation: Assets and liabilities belong to the entity.
3) Completeness: Existing amounts are included.
4) Accuracy: Amounts included are correct.
5) Valuation: Assets are included at the amounts estimated to be realized.
6) Classification: Amounts are properly classified.
7) Detail tie-in: Transaction details sum to the master file amounts, and subsidiary records agree with the balance in the General Ledger
8) Cut-off: Transactions near the Balance Sheet date are recorded in the proper period.

General Presentation and Disclosure-Related Audit Objectives:
1) Occurrence: Disclosed information has occurred.
2) Rights and Obligations: Assets belong to the entity and obligations are owed on behalf of the entity.
3) Completeness: Relevant disclosures should be included.
4) Accuracy: Information should be mechanically accurate.
5) Valuation: Information should be disclosed fairly.
6) Classification: Information is appropriately described in the correct accounts.
7) Understandability: Amount balances and related disclosure requirements are clearly presented in the financial statements.

Real Life Example #1: How to Audit Accounts Receivables
Your goal as the auditor is to detect audit risks, such as 1) receivables do not exist 2) recorded receivable balances are inaccurate 3) it may not be possible to collect A/R 4) the derivation of the allowances for doubtful accounts may not properly reflect bad debt experience 5) sales transactions were not processed in the correct periods 6) revenue was incorrectly recognized.

1) Trade receivables report to G/L: Trace the grand total of A/R Aging Report to the A/R total amount in the G/L. If these totals do not match, there could be a journal entry in the G/L which should not be there.
2) Calculate the receivables report total: Add up the invoices on the A/R aging report to verify that the total traced to G/L is correct.
3) Investigate reconciling items: If you have A/R-related journal entries in the G/L, review the justification for the larger amounts.
4) Test invoices listed in receivables report: Select some invoices from the A/R Aging Report and compare them to supporting documentation to see if they were billed in the correct amounts, to the correct customers, and on the correct dates.
5) Match invoices to shipping log: Match invoice dates to the shipment dates for those items in the shipping log, to see if sales are being recorded in the correct accounitng period.
6) Confirm A/R: Select some larger account balances and contact your customers directly and ask them to confirm the amounts of unpaid A/R as of the end of the reporting period.
7) Review cash receipts: Verify that customers have paid the invoices.
8) Assess the allowance for doubtful accounts: Review the process with a consistency comparison with the method you used last year, and a determination of whether the method is appropriate for the business environment.
9) Assess bad debt write-offs: Compare the proportion of bad debt expense to sales for this year in comparison to prior years, to see if the current expense appears reasonable.
10) Review credit memos: See if credit memos were properly authorized, whether they were issued in the correct period, and whether the circumstances of their issuance may indicate other problems.
11) Assess bill and hold sales: Examine your supporting documentation to determine whether a sale has actually taken place.
12) Review receiving log: See if the receiving log records an inordinately large amount of customer returns after the audit period, which would suggest that the company may have shipped more goods near the end of the audit period than customers had authorized.
13) Related party receivables: Review them for collectability.
14) Trend Analysis: Review a comparison of A/R and sales over time to see if there are any unusual trends.

Real Life Example #2: How to Audit Inventory
1) Cut-off Analysis: Examine the procedures for halting any further receiving into the warehouse or shipments from it at the time of the physical inventory count so that extraneous inventory items are excluded.
2) Observe the Physical Inventory Count: Familiarize with the procedures used to count the inventory.
3) Reconcile the Inventory Count to the G/L: Trace the valuation compiled from the physical inventory count to the company's G/L to verify that the counted balance was carried forward into the company's accounting records.
4) Test High-value Items: Ensure that high-value items are valued correctly and trace them to G/L.
5) Test Error-prone Items: If you notice an error trend in prior years for specific inventory items, test these items again.
6) Test Item Costs: Find out where purchased costs in the accounting records come from, so you can compare the amounts in recent supplier invoices to the costs listed in the inventory valuation.
7) Test for LoCM (Lower of Cost or Market): Compare a selection of market prices to their recorded costs
8) Finished Goods Cost Analysis: Review the bill of materials for a selection of finished goods items, and test them to see if they show an accurate compilation of the components in the finished goods items and correct costs.
9) Direct Labour Analysis: Trace the labour charged during production on time cards to the cost of the inventory. Investigate to see if labour costs listed in the valuation are supported by payroll records.
10) Overhead Analysis: Verify that the company is consistently using the same G/L accounts as the source for overhead costs, check for abnormal costs, and test the validity and consistency of the method used to apply overhead costs to inventory.
12) Work-in-Process Testing: Test how the company determines a % of completion for WIP items.
13) Inventory Ownership: Review purchase records to ensure that the inventory in the warehouse is actually owned by the company.
14) Inventory Layers: If the company is using a FIFO or LIFO inventory valuation system, test the inventory layers recorded to verify that they are valid.

Noh Review on Sustaining Excellence – September 9, 2012

1. Harvard Business Review “For Those Who Want to Lead, Read” by John Coleman

Overview: This article emphasizes the importance of reading and how reading can develop you to become a better leader. It mainly focuses on the benefits of reading in the context of leadership.

Key Lessons:

• Benefits of reading: insight, innovation, empathy and personal effectiveness
• Reading can improve your intelligence by developing your vocabulary and knowledge as well as abstract reasoning skills, which eventually leads to innovation and insight.
• Reading can increase verbal intelligence and help a leader become a more adept and articulate communicator.
• Reading novels can improve empathy and understanding of social cues, strengthening teamwork and collaborative skills.
• An active literary life can help you stay relaxed and keep a great work-life balance. 

Noh Review: Some people do not like reading because it isn’t exactly an exciting activity. This is especially the case if we are talking about a thick book. What is the main purpose of reading and what is it that people get from reading a book? The answer is obvious and simple. We mainly read a book in order to go through what is written in the book. To enjoy the aforementioned benefits of reading, you don’t necessarily have to read a physical book. Some people prefer reading soft copy over hard copy because staring at the computer screen helps them stay committed and focused. It can even be audio files, mp3 files or video clips which contain the same content of a book. It can really be anything. As long as you are regularly and constantly engaged in the process of obtaining new knowledge, you are on the right track to your personal development.

Article: http://blogs.hbr.org/cs/2012/08/for_those_who_want_to_lead_rea.html

2. Harvard Business Review “Ten Reasons Winners Keep Winning, Aside from Skill” by Rosabeth Moss Kanter

Overview: This article discusses how winners sustain their success. It explains 10 important advantages that winners take away from their victory to win again.

Key Lessons: 

In the context of sports, life, in-the-office, etc., winners keep winning because of the following advantages resulting from a victory:

1) Winning puts the winner to a good mood. Because we are humans with feelings, emotions affect our performance. 

2) Winners stay longer together while losers go home early. Spending more time together leads to more solidarity, information sharing and mentoring.

3) Winners accept negative feedback in order to improve while losers tend to avoid feedback. For example, when you receive a horrible mark on your exam, you feel too ashamed to open the exam. Instead of going over every question and figuring things out, you just want to forget about it and be done with it for now. On the other hand, when you receive a 96% on your exam, you feel happy and confident enough to ask your professor where you lost the 4% so that you can learn and improve for the future.

4) Winners have fewer distractions while losers have their own pressure to win and make up for their previous loss

5) Once a winner wins, he has the time and optimism to maintain high aspirations and act generously toward others. This creates a positive culture of mutual respect. 

6) Behind a victory, there’s a solid support system. The support system stays there for the winner’s second and third win. 

7) Winning produces favourable story about the past and future while losing produces more criticism.

8) Winning grants you access to valuable networks and relationships.

9) Winners have more control over their own destiny because they have self-determination.

10) Winners can enjoy their stability and long-term strategies whereas losers often confront new coaches, strategies and systems for the purpose of trying to win next time.

• As long as a winner does not get over-confident, arrogant or complacent, his comebacks are more likely to happen due to the advantages that he has.  

Noh Review: A victory never guarantees anther victory. The competition might get tougher or the winner may lose his motivation to pursue the next victory.  If you have won something in life and you want to keep winning it in the future, I want you to know that regardless of all the odds, you are still at an advantage over others who have yet to win.

Article: http://blogs.hbr.org/kanter/2012/08/ten-reasons-winners-keep-winni.html

Noh Review on Companies & Industries – September 4, 2012

Bloomberg Businessweek “At Abercrombie & Fitch, Sex No Longer Sells” by Sapna Maheshwari

Overview: This article is about Abercrombie & Fitch and where it is currently positioned. A&F is going through hard times, and the author believes that it will only continue to get worse for them.

Key Lessons:

• A&F once attracted many teenagers with their sexy models, but their marketing is losing its edge. They have lost 1/3 of the market value in the past year with falling sales in Europe and the U.S.  Abercrombie shuttered 71 U.S. stores, and will close another 180 through 2015.
• A&F failed to change with the times. It’s great that they have sexy models to represent their store. But, what are they trying to accomplish here? Does the sexyness of their models mean anything to the customers? A&F no longer has the next big thing which attracts customers because their “coolness” is disappearing. On top of that, customers are less inclined to wear A&F’s expensive clothings, so they began moving on.
• Abercrombie's brand is supposed to appear rebellious, indie and different. But, the current product mix does not communicate or facilitate the brand.
• The good thing going for A&F is that they are about to expand into China and the Middle East. However, there is no saying that the brand's fading cool will not catch up with the local shoppers in Dubai and Shanghai.

Noh Review: A&F must change their current strategy because there no longer exists a core idea in it. The A&F brand is fading because their “coolness” or “sexyness” no longer strikes the consumers’ interest or desire to purchase. A&F are losing their popularity, but they are not losing their high prices. At this rate, their sales and market value will continue to suffer. They should actively conduct product research and product market survey to find out what the current trend considers rebellious, indie and different. The least that they can do at this point is to change their current pipeline of products and have the proper product mix in order to minimize the damage.

Article: http://www.businessweek.com/articles/2012-08-30/at-abercrombie-and-fitch-sex-no-longer-sells#r=com-s

Noh Review on Recruitment and Selection – September 3, 2012

1. Harvard Business Review “The Surprising Secret to Selling Yourself” by Heidi Grant Halvorson

Overview: This article emphasizes the importance of your potential for success when it comes down to a hiring or promotion decision. Regardless of our logic and intuitions, decision makers subconsciously pay more attention to your potential for future greatness than what you have already accomplished. This ought to be interesting for graduating students who are applying for full-time jobs or simply anyone trying to make an impression.

Key Lessons:

• How do we make an impression? We have all heard the following: Practice your pitch. Speak confidently at a good pace. Make eye contact.  Highlight your accomplishments without being too cocky. 
• But what really impresses decision-makers? They like the next big thing more than the current big thing because they prefer the potential for greatness over the current greatness.
• For example, John and Mike are competing for a job. John has had successful experience related to the job, and he has a high potential for job success. On the other hand, Mike does not have any relevant experience, but he still has a high potential for job success. All things equal, Mike is more likely to get hired even though he has no experience.
• This hiring decision is both risky and inherently irrational, but we still do it. Why? When humans come across uncertainty, we go into in-depth processing because we want to think hard and figure it out ourselves. This long process leads to a more favourable view of the candidate in the end.  
• As a job seeker, focus your pitch on the future as an individual rather than your track record.

Noh Review: If I were at a job interview, I would throw a few key accomplishments of mine here and there, which would imply my potential for future success. It wouldn’t be wise for you to bluntly discuss about your potential and state where you will be 5 years from now because it would kill their fun of guessing and figuring you out. The best mix would be some key past track records mixed with their implications for the future.  

Article: http://blogs.hbr.org/cs/2012/08/the_surprising_secret_to_selli.html

2. Harvard Business Review “I Won’t Hire People Who Use Poor Grammar. Here’s Why.” By Kyle Wiens

Overview: This article emphasizes the importance of grammar and spelling when trying to score a job.  This is an obvious fact, but your grammar on the paper shows more about you than you can assume.

Key Lessons:

• Grammar equals credibility. These days, most of communication is done online. For example, when you read someone’s Facebook status, Twitter post or  e-mails, they only have words to get to you. People judge you immediately if you can’t use proper grammar.
• Typos or simple spelling mistakes can be overlooked. But, if you can’t tell the difference between “your” and “you’re” (or difference between “their” and “there”), your credibility and capabilities harshly fall. Your client will lose their interest and confidence.
• How can people frame you when you use poor grammar? Poor writing abilities, poor communication skills, poor learning curve and poor attention to detail

Noh Review: We all know somewhat about the importance of grammar and spelling when applying for a job because we have heard so much about it. But many do not realize that grammar is the simplest and easiest tool for hiring managers to weed out poor-quality applicants. There are hundreds of job applicants who are dying to score that job. If you are one of those job applicants, your only way to make impression on paper is by using words. But, if you don’t know how to properly use words, then you are out of luck. Decision-makers judge you and move on quickly because their time is precious.  I would suggest signing up for resume critique sessions or getting someone to critique your cover letter and resume. Extra caution takes less than a day, but first impression lasts a lifetime.

Article: http://blogs.hbr.org/cs/2012/07/i_wont_hire_people_who_use_poo.html

Noh Review on Marketing - August 31, 2012

Harvard Business Review "Marketing Is Dead" by Bill Lee

Overview: This article discusses how the traditional marketing (advertising, public relations, branding and corporate communications) is not as effective any more. The author suggests peer influence and community-oriented marketing which fit better into the current trend.

Key Lessons:

• Buyers often get their information from other sources, such as the Internet, word-of-mouth and customer reviews. The current social media trend has made the traditional marketing communications irrelevant and ineffective. Consumers are less influenced by the traditional marketing methods these days because there's no place for traditional marketing in their purchasing decision.
• Extending traditional marketing logic into the world of social media does not work. For example, the effects of marketing on Facebook are controversial.
• Peer-influence-based, community-oriented marketing has a better chance of creating sustained growth through authentic customer relationships.
• Community Marketing: As a consumer, you are more likely to trust what your neighbours or friends have to say than salespeople or corporate website content. Accordingly, you should focus on aligning your company's social media efforts with community-oriented buying experience.
• Peer-Influence-based Marketing: Get customer influencers to talk positively about your products. 
• Customer Lifetime Value (CLV) shouldn't only be based on the money that the customer pays you through his purchases. You should look at the potential value of that customer, including his social status, influence, power and the size of his network. 
• Reward the best customer advocates and influencers with social capital, such as reputation, access to new knowledge and larger affiliation networks instead of traditional cash rewards or discounts.
• Florida Teen Tobacco Case: In order to reduce the teen smoking rate, the State of Florida got influential customer advocates (cool teens who were student leaders or athletes) to deliver the message. Instead of pushing the traditional warning message, which consisted of the critical health problems caused by smoking, they utilized people who had the most influence on teen smokers. As a result of the peer influence, teen smoking in Florida dropped by nearly half between 1998 and 2007.

Article: http://blogs.hbr.org/cs/2012/08/marketing_is_dead.html

Noh Review on Leadership - August 29, 2012

1. Harvard Business Review "Who Can Teach Leadership?" by Gianpiero Petriglieri

Overview: This long article talks about how you can minimize the resistance from your audience when teaching leadership or leading a group. How can you come across as "qualified" in the eyes of the audience? The author argues that it is all about gaining trust. This can be especially interesting for people who are currently guest speakers, executives who deliver presentations to their staff members, or simply anyone interested in public speaking.

Key Lessons:

• We learn to lead through the experience of leading and following.
• If you embrace different perspectives and values, your audience will learn more deeply from you and make the most out of their learning experience. Your ability to maximize their return on experience comes before your qualifications or work history as a lecturer.
• The audience always wonders how trustworthy the lecturer is. Trust likely decreases when 1) the lecturer seems less familiar 2) the lecturer does not prove that he understands or values the concerns and aspirations of the audience 3) the lecturer does not take the views of the audience into account.
• If you are a lecturer or presenter, you must accept the fact that there will often be skepticism (mistrust with curiosity) and cynicism (preconceived rejection). In order to overcome these, it is critical for you to establish the audience's trust  as soon as you see an opening.
• In my opinion, you should focus less on your history, past work experience or names of fancy executives whom you met. Rather, you should explain to the audience in detail how you plan on enriching their knowledge and maximizing their learning experience in the given time that you have. If you show that you truly care about their needs and learning experience, you will gain their trust a lot quicker.

Article: http://blogs.hbr.org/cs/2012/08/who_can_teach_leadership.html

2. Harvard Business Review "Three Leadership Traits that Never Go Out of Style" by Vineet Nayar

Overview: In this short article, the author goes over 3 leadership traits which always stand out. They are discussed below.

Key Lessons:

• 1) Trust: If your team members realize that you trust them unconditionally, they will feel empowered. This often leads to innovation, risk-taking attitude, and higher morale.
• 2) Empathy: If your team members see that you truly care about them and their feelings, they will more likely enjoy their work. This often leads to a more connected office environment and higher productivity. 
• 3) Mentorship: If your team members realize that they have a mentor that they could rely on, they will feel more confident and secure about themselves. Once they see you as their mentor, they will find it easy to talk to you and approach you. This often leads to better teamwork and motivated employees.

Article: http://blogs.hbr.org/hbr/nayar/2012/08/three-leadership-traits-that-n.html

Noh Review on "Samsung vs. Apple" - August 27, 2012

1. Bloomberg Businessweek "Apple Gets $1 Billion From Samsung—Nothing Changes" by Paul Barrett

Overview: This article is about the patent trials between Samsung and Apple. The author briefly discusses what went down in the court and the implications of Apple's win.

Key Info:

• Result of the first of many patent trials in the U.S: Samsung must pay Apple $1.05 billion for infringing 6 of the 7 patents for Apple mobile devices
• But, it is too early for Apple to celebrate. Samsung will appeal the San Jose verdict soon, and there are other continents and areas for these many patent lawsuits.
• For Apple, this is not just a battle against Samsung. It is Apple's shout out to the other rivals, such as Motorola and HTC.

Article: http://www.businessweek.com/articles/2012-08-24/apple-gets-1-billion-from-samsung-dot-and-nothing-changes

2. Harvard Business Review "Who Cares If Samsung Copied Apple?" by James Allworth

Overview: This article provides an interesting view on the argument that Samsung copied Apple. The author discusses how the fierce competition and all the copying have fuelled Apple to continuously come up with innovative products.

Key Lessons:

• Author's View: Before asking whether Samsung copied Apple or not, it is important for us to determine how it would affect consumers and other companies in the future.
• Apple's argument "If our competitor copies us, it is impossible for us to keep innovating" is flawed. Regardless of what they claimed during the lawsuit against Microsoft, Apple continued to unveil the iMac, OS X, iPod, iPhone and iPad. Rather, the fierce competition accelerated Apple's innovation. The logic is that the competition fueled Apple's awareness for R&D and their speed in innovation. 
• According to The Knockoff Economy: How Imitation Sparks Innovation, innovation stops without protection from copying. Great innovations often build on existing ones - and that requires the freedom to copy.
• Regardless of the outcome of this court case in the U.S., there will be no material change in Apple's innovation or pricing. Even with Samsung's win, it will not result in slower development of Apple's products.
• There are already so many lawsuits going around in the world, which suggest that everyone is already copying each other. Instead of having lawsuits as their defence, the most ideal solution would be for the leading companies to innovate at such a rate that their competition can't copy them fast enough. This would be a win-win for both consumers and and the innovators.
• In my opinion, this isn't always a feasible option, especially for smaller companies with less funding on R&D. However with what Apple has, Apple can't complain about this solution.

Article: http://blogs.hbr.org/cs/2012/08/who_cares_if_samsung_copied_ap.html

Noh Review on General Business - August 26, 2012

1. Harvard Business Review "It's More Important to Be Kind than Clever" by Bill Taylor

Overview: This article is about how efficiency should never come at the expense of humanity. Before asking how your business can improve its productivity, efficiency or analytical procedures, it is important to recognize that it exists for humans. Reading this article would make you think about Corporate Social Responsibility again.

Key Lessons:

• If a business sacrifices humanity in order to make more profits, it will lose its people and customers.
• It is more important for a business to be geared towards humans and their needs.
• Panera Bread Case: Although a small act of kindness does not normally make headlines on newspapers, it does these days thanks to SNS. Word of mouth is extremely powerful these days on Facebook and Twitter because it can spread very quickly. Hence, positive word of mouth can even beat the payoffs of traditional marketing methods. 
• Technology, business analytics and efficiency are shaping today's world. However, we must remember that our business/company/organization exists for people. If our company has a promising product which is expected to bring high profits but the product has a low chance of harming the user, we must rethink about this product. Even if the chance of harming the people is significantly low, people and their safety come before our profits.

Article: http://blogs.hbr.org/taylor/2012/08/its_more_important_to_be_kind.html

2. Harvard Business Review "Morning Advantage: What it Really Means to Be a Compassionate Leader" by Kevin Evers

Overview: This short article discusses how to be effective as a compassionate leader. Reading this article would make you realize that being compassionate isn't as easy as you think.

Key Lessons:

• Compassion can enhance productivity and bring profits.
• It is important for a leader to confront difficult situations and drop the fear of being unkind to his people. We should not confuse compassion with kindness. Compassionate leaders care about their people, but they also know when to engage in tough conversations in order to fuel their development and growth.

Article: http://blogs.hbr.org/morning-advantage/2012/08/morning-advantage-what-it-real.html

3. Harvard Business Review "Why Remote Workers Are More (Yes, More) Engaged" by Scott Edinger

Overview: This article shocks you by throwing a surprising fact: remote workers are more engaged and committed than employees whom you work with in the office. The author provides why this is the case by giving you realistic views on the office environment as opposed to the virtual environment.

Key Lessons:

• People at work these days overuse emails and messengers in order to communicate with each other. Even for people who sit metres away from each other in the office, actual face-time or an in-person conversation does not happen because technology has made it so much easier to communicate with someone just sitting at your desk.
• When a leader is physically distant from others in an organization, he will make extra effort to make contact. He will try harder to connect with the people and get to know the people better. 
• Virtual meetings tend to be more focused and concise because each remote worker has other duties in his life. Everyone on the team values his time and respects other workers' time.
• It beats our common sense, but remote workers tend to be more engaged and productive than people who work in the office. 
• Obviously, the engagement or commitment of workers is case by case. If you are a leader working with people in the office, remember to increase face-time with your employees. It is important for a leader to be approachable so that his employees feel comfortable in the office, leading to better in-person communication and teamwork. 

Article: http://blogs.hbr.org/cs/2012/08/are_you_taking_your_people_for.html