My husband is a neighborhood handyman and he loves to collect tools. He stores them in the garage, his bedroom closet, and his big, white panel van.
But he also carries around a small box of essential tools with him wherever he goes. In it, you’ll find an adjustable wrench, a Phillips head screwdriver, a flathead screwdriver, a box cutter… you get the picture.
No need for a heavy box. Audit models go with me everywhere I go, because they are in my head!
That way, he can quickly respond when something is broken. It is gloriously comforting to have him around because he can fix anything.
I also carry around a little box of tools. Only my tools are in my head. They are audit models and structures that I have collected over the years. Some of them are sourced from professional literature; some I picked up working with audit teams and editors.
Here are the tools I carry with me always with links so you can find out more:
“What kind of report writing problems does your audit staff have?”
When a potential client asks me to conduct a writing seminar, this is the first question I ask. It was my first question when I was asked to be an editor and writing coach at a state auditor’s office.
Invariably, the project manager, manager, or director with whom I am chatting says, “My staff just doesn’t know how to write! They need help!”
So I dig a little deeper.
“Are they unable to write clear sentences?”
The response is usually, “No, they can write sentences. I end up having to fix a lot of their sentences, but they can write sentences.”
“Is the problem grammar or spelling?” I ask.
“No, not really. That is easily fixed.”
“Is it that the concepts are unclear or disjointed? Do the reports make any sense?”
“I think that is the real problem. The staff doesn’t seem to be able to focus on what is important about an issue, and we go round and round and round trying to distill what the main issue is. It takes us way too long. Sometimes it takes us over a month to get a report out.”
Are you laughing to yourself right now? You may be thinking:
A month! I wish we could get our reports out that fast!
A month! What are those people thinking? We take a week at the most. OR
Yes, a month is how long it takes us, and that is ridiculous.
Would you believe that some audit teams only take a few days to issue a report? Would you believe that some audit teams take six or more months? Yep, both are true. I have been in the profession for over 30 years and have worked with a variety of audit shops and firms, and I have seen the gamut.
A few simple report writing problems
What I found, both as a writing coach and as a writing instructor, is that all of the problems with writing usually stem from a few simple problems:
On the front end, the leaders are not clear about what they expect the audit report to look like
The reporting process is broken
The leaders are control freaks who won’t allow the staff to have their own voices.
Did you notice whom I was holding accountable for problems in those bullets? The directors, managers, and project supervisors call to ask me to fix their staff, when it is really the director, manager, or project supervisor that is causing the report writing problems.
But it is so much easier to blame someone else, isn’t it? Blame, of course, gets you nowhere. Consider this quote from Thich Nhat Hanh:
“When you plant lettuce, if it does not grow well, you don’t blame the lettuce. You look for reasons it is not doing well. It may need fertilizer, or more water, or less sun. You never blame the lettuce. Yet if we have problems with our friends or family, we blame the other person. But if we know how to take care of them, they will grow well, like the lettuce. Blaming has no positive effect at all, nor does trying to persuade using reason and argument. That is my experience. No blame, no reasoning, no argument, just understanding. If you understand, and you show that you understand, you can love, and the situation will change.”
Don’t blame the lettuce if it doesn’t grow. Give it what it needs to thrive.
Next steps
So, if you can get past the blame 🙂 , I would love to offer a fun and enlightening training class to you and your staff. That is a good first step to get everyone to hear the same message and make decisions about how they are going to fix these problems.
But after the class, it is up to leadership to keep the momentum going by setting very clear expectations about the content and format of reports, by re-engineering the report writing process, and by letting go of absolute control and allowing the staff to have their own voice when they write.
Writing the audit report doesn’t have to be torture. It can be a one of the best parts of your job. Yes, really!
When I review audit documentation, I don’t care about grammar, spelling, color, or hyperlinks. I ignore all of that petty detail because it keeps me focused on the minutia instead of the big picture.
What I am looking for is how the key elements of the audit fit together and whether the audit documentation tells an interesting story about how you got from your vague audit assignment to your findings and conclusions.
Key pieces of the audit documentation should link to each other
Audits tend to double back on themselves and can feel quite chaotic as you work through them. No audit is perfectly linear.
However, chaos is NOT the feeling you want to convey to the reviewer of your audit documentation! Instead, lead the reviewer through a logical, organized story.
First explain to the reviewer what your initial audit assignment was and why it was deemed worthy of your team’s time.
Then describe in your audit documentation:
The research performed to understand the audit subject
The filters you applied to remove boring or irrelevant subject matter so that the team could focus on the good stuff
The revised, finite objectives(s) the team is seeking to answer
The audit methodologies you used to answer the objective(s)
The findings that result from performing the methodologies
The conclusion(s) that answer the finite objective(s)
All of the items on that list should connect and flow. Some auditors actually have a formal title for this relationship: linkage.
Audit documentation is very idiosyncratic and therefore I can’t recommend exactly what linkage should look like. I just know that I need to find it somewhere. Maybe it is in a few key memos or audit programs. Maybe it is in a lead sheet.
Just, please, don’t make your reviewer hunt for it! Make the location of all of these pieces – and how they link to each other – obvious.
Consider these two quotes from the GAO’s Yellow Book
GAGAS tells us which pieces of our audit documentation should support each other in these two paragraphs:
8.35 A written audit plan provides an opportunity for audit organization management to supervise audit planning and to determine whether
a. the proposed audit objectives are likely to result in a useful report;
b. the audit plan adequately addresses relevant risks;
c. the proposed audit scope and methodology are adequate to address the audit objectives;
d. available evidence is likely to be sufficient and appropriate for purposes of the audit; and
e. sufficient staff, supervisors, and specialists with adequate collective professional competence and other resources are available to conduct the audit and to meet expected time frames for completing the work.
AND
8.06 Auditors should design the methodology to obtain sufficient, appropriate evidence that provides a reasonable basis for findings and conclusions based on the audit objectives and to reduce audit risk to an acceptably low level.
This picture may help
This picture may help you see how the pieces fit together. See how the broader objective is broken down into smaller subobjectives?
Link the conclusion to the objective. The objective to the subobjectives. The subobjectives to your findings, and the findings to your methodologies.
And see how findings support the answers to the subobjective? There might be multiple findings under each subobjective, I just couldn’t fit that in the graphic! And then do you see how how the condition, effect, and cause of the findings must be supported by methodologies (which I call tests on this graphic)?
A GAGAS audit puts you on the front line of the never-ending fight for good government. Government auditors are powerful and knowledgable, but not everyone knows that.
I imagine that you, like me, have listened patiently while your brother-in-law spouts off about how stupid government is. Half of what he says is off-base, and he clearly doesn’t understand how government works and what government is about.
The next time he has a few drinks at a family get-together and starts his rant, you could interrupt him and give him some schooling. Of course, it may not be worth it to poke a drunk bear, but just in case you decide to take him on one day, I want to arm you with some conceptual ammunition that might shut him up for a while.
Our work is noble
First of all, our work is pretty cool. Noble, in fact.
One wise city auditor told me that his life’s mission was to make sure that citizens who do not have a voice or power are taken care of. Can your brother-in-law say that about his job?
Here is what Gene Dedaro, the head of the GAO, says in his introductory letter to GAGAS:
Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process.
I love knowing that my job, as tedious as it can be sometimes, has a higher purpose and meaning.
Government should NOT run like a corporation
I get especially irritated when I hear people say that government should run like a corporation. Uh, NO…brother-in-law, you really don’t want that because corporations hide information and are in it to make a profit.
If you work for Apple, it makes sense to keep your actions and progress secret so that you beat your competitors to the market.
But we don’t want our government officials to be secretive. Both government officials and auditors should be open about what they are doing and why they are doing it.
For instance, the City of Austin discloses budgets and transactions of all City departments online in real time. I can, with a few clicks of the mouse, see that the Police Department bought a van, how much the van was, who they bought it from, why they need it, and what color of funds (general revenue, special revenue, enterprise revenues) paid for it.
“Why bother with all that?” your brother-in-law may say. Because that is our money – the taxpayer’s money – and we all have a right to know what it is being used for!
And then you can point out that he would not like it if his government treated him like a corporation treats its customers. A corporation only courts customers when they want more moola (maybe so the executives can renovate their mansions in the Hamptons!).
Instead, the customer of a government program may be a child who has no money at all. In government, it isn’t all about the money; it’s about service!
GAGAS audits help the children.
On a GAGAS audit, auditors are checking to see whether tax dollars are being used for their intended purpose and whether the public is being served by the auditee’s efforts.
Consider this quote from the 2018 Yellow Book: GAGAS 3.08 A distinguishing mark of an auditor is acceptance of responsibility to serve the public interest. This responsibility is critical when auditing in the government environment. GAGAS embodies the concept of accountability for public resources, which is fundamental to serving the public interest.
Good government isn’t self concerned
Recently on TV news, I saw a high school coach (who I consider to be a government official) whining about the death of one of his teenage football players. The coach was responsible for the death because he made the teenager run laps in 100 degree heat and refused him water. Instead of being contrite, the coach said something like, “Everyone is forgetting that I suffered a loss, too, and that I will hold on to this for the rest of my life.”
That is not exactly what the parents of that boy wanted to hear. He deflected accountability for the accident and tried to engender empathy for himself. YUCK.
The GAO does everything they can to fight this self-centered approach to governing. Accountability is the anecdote for selfishness. And GAGAS repeatedly reminds us that government officials are accountable to the taxpaying public for their actions and that we, as auditors, have a crucial role in holding government leaders accountable.
1.02 The concept of accountability for use of public resources and government authority is key to our nation’s governing processes.
1.05 Government auditing is essential in providing accountability to legislators, oversight bodies, those charged with governance, and the public.
But just to be clear, GAGAS audit standards are not written for government officials (although government officials are mentioned a few times); they are written for auditors.
So, while we auditors hold public officials and employees accountable for their actions, we are held accountable for our actions, too. We have to model the behavior that we expect from our auditees. Otherwise, we lose credibility and influence. For example, GAGAS auditors are required to disclose whether they followed every ‘must’ and ‘should’ audit requirement and list the requirements that they did not follow in the audit report.
Be proud of what you do for all of us
So, next time your brother-in-law starts popping off, you can inform him that you are a proud member of a profession that is trying to take care of the issues that he lectures about every time he has a few beers in him. This will open the door for you to go on a little rant of your own about government accountability, transparency, and service. Then you can drop the mic and leave him stunned with his mouth gaping open.
Auditors apply multiple types of reasoning as they seek the truth. But some auditees don’t agree with our version of the truth!
Maybe some of the conflict occurs because we are using a different type of reasoning than the auditee.
I don’t really see it that way!
We all have a preferred reasoning style – a way that we get to the truth – and what passes for truth has evolved over time.
Let’s cover how the definition of truth has evolved over time and define five common types of reasoning. Then I’ll give you an example of how each of these five most common types of reasoning (or truth-seeking techniques) can be applied to an audit.
Five types of reasoning
The first formally recognized method of uncovering the truth was called “rationalism.” In rationalism, if you can imagine it, it can exist. For example, clothes on any given group of people will range in color and a good number of people will be wearing red. You can rationalize that because there are so many variations on red, there has to be a “master” or “perfect” red in existence. You can see the limits of this way of thinking. Just because you can guess that something should be there does not mean it is there.
Then came empirical reasoning. In empirical reasoning, you begin with a hypothesis and then you gather evidence or experiment to support your hypothesis. This is the most common method used by scientists in their work. There is a limit to this kind of thinking also, as your hypothesis might be flawed or your experimentation method might be limited. For instance, cancer researchers are working to prove a handful of hypotheses — some of them being that cancer is a virus and some of them being that cancer is genetic. Both hypotheses have supporting evidence.
Then you have existential reasoning. This type of reasoning says that my version of the truth will be different than your version of the truth because we see reality through different lenses or experiences. Therefore, all truth is relative. In essence, existential reasoning says, “My version of the truth is as good as yours.”
Ethical reasoning asks that you determine what you value most and then weigh decisions based on what you value. If you value human life above justice, then the death penalty is wrong. If you value justice above human life, then the death penalty is acceptable.
And then the last form of reasoning is revealed reasoning, or reasoning based on trust and faith. Because you trust or believe in the source of the information, you believe in what the source says. This is the kind of reasoning necessary to believe religious truths. This is also the sort of reasoning we rely upon when we listen to the opinions of a political pundit on cable news. If Rachel Maddow or Rush Limbaugh speak it, it must be true… we trust them, right?
What type of thinking do auditors use?
I’ve seen auditors use all of these types of reasoning. If auditors are crafty they will use several types in their audit reports! The more types of reasoning we use, the more likely we are to sway the auditee.
Let’s look at an example that centers around one of an auditor’s favorite internal controls: cash reconciliations.
Empirical Reasoning
Auditors lean on this type of reasoning quite a bit.
For instance, if we want to prove that the cash reconciliations are not being done, we start with the hypothesis that cash reconciliations are not performed monthly. Then we gather evidence by testing to see if reconciliations were performed every month. If we find that for 6 out of 12 months tested that reconciliations were not performed, we have proved, empirically, that our hypothesis was correct.
Rational Reasoning
In order to make sure that reconciliations are performed in the future (which is our true goal), we could recommend that the supervisor reviews the reconciliations each month. The supervisor’s review isn’t the key control, but it is a related control that will help ensure that the key control (reconciliations) are in place. That’s just common sense, right? Perfectly rational.
Revealed Reasoning
Revealed reasoning is based on the credibility of the source of the truth. One of the most persuasive tools we auditors have at our disposal is the audit finding. And our audit findings should include a criteria established by an authority that the client also sees as an authority, like an oversight body or the federal government. That way, the auditee can’t shrug off our recommendation that they reconcile cash because someone higher up the food chain requires them to.
But let’s say that there isn’t a third-party authority that requires our auditee to perform cash reconciliations. Then it will be important for us to maintain our professional credibility so that we auditors are seen as a relevant and reliable source of the truth. The Yellow Book says:
GAGAS 2018 3.03 Auditors and audit organizations must maintain independence so that their opinions, findings, conclusions, judgments, and recommendations will be impartial and viewed as impartial by objective third parties with knowledge of the relevant information. Auditors should avoid situations that could lead objective third parties with knowledge of the relevant information to conclude that the auditors are not able to maintain independence and thus are not capable of exercising objective and impartial judgment on all issues associated with conducting the audit and reporting on the work.
Ethical Reasoning
Yes, the accounting manager might be right. This finding you are proposing on reconciliations could hurt his career, and he values his job.
However, our job as auditors is to let those in charge of governance know when key controls are not working. Auditors usually value accuracy and the preservation of the organization’s financial resources above any one person’s career.
So, we use ethical reasoning to justify our choice to report in spite of the audit manager’s protests.
Existential Reasoning
Although from the accounting manager’s point of view, reconciling an account that only has 45 transactions a month is not worth his staff’s time, you identified it as a material weakness in your risk assessment because your audit objective was focused on this particular cash account.
From the audit manager’s viewpoint this issue isn’t worth the attention of those charged with governance. But you chose this account to audit because it is connected with a brand new federal grant.
Your version of the truth is different than the auditee’s version of the truth and you may never agree. How existential!
Throw them all out there to see which one sticks
So if you do encounter resistance to your ideas, try these types of reasoning one by one until you see what sticks. In theory (rational reasoning, yet again!) you should get less resistance from the auditee if you use several types of reasoning to make your key points.
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