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A good Read About Audits
Why do we carry out Audits as entities?
1. Is it because we have always written audit reports. It’s what we do?
This should never be our answer. We don’t accept an answer like this from management during an audit, do we. There has to be a reason based on the value to our customers in management and on the board.

2. Is it because we are required to write audit reports by IIA Standards?
This is a very weak argument. We should never do something just so we can say we comply/conform with the IIA’s Standards. There has to be at least as much value to our customers as it costs us in scarce resources. Remember that every hour on an audit report is an hour not auditing or providing advice on a risk that matters.
:
Standard 11.3: The chief audit executive must communicate the results of internal audit services to the board and senior management periodically and for each engagement as appropriate.
Standard 15.1: For each engagement, internal auditors must develop a final communication that includes the engagement’s objectives, scope, recommendations and/or action plans if applicable, and conclusions.
Standard 15.1 goes much too far when it dictates what must be included in the communication. It’s a rule when the Standards should be principle-based.

3. Is it because to management and the board expect a report?
Maybe they do because that is what they are used to. But is it what they need? Do they understand that there are options?
Are they reading them out of duty or because they need the information to do their jobs?
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In fact, I would bet that the majority of senior managers (and even many if not most board members) don’t read the entire report.
If the reports contain information they need, do they also contain information they don’t need? What can we eliminate to stop wasting their (and our) time?

4. Is it because the regulators require an audit report?
Do they? Again, aren’t they looking for evidence that a source of risk has been audited and the results communicated with management? Is the traditional audit report the only form of evidence we have? I hope not! Maybe we should talk to them and agree on expectations.

5. Is it because the reports drive action. It’s how we get management to address issues and make changes?
An audit report is a very poor way of persuading management to make a change. If you haven’t persuaded them when you met and talked about the issues and the risks they represent, why should you think an audit report will be more persuasive? Remember, we are expected to discuss potential issues as they arise during the audit, agree on the facts, their implications, and what should be done by who and when.
Remember also that all of this should be discussed and confirmed during the closing meeting. So who needs persuading?
6. Is it because the report documents the corrective actions that will be taken?
Is it needed just for that? Isn’t there a better way, such as writing a memo to confirm what was agreed at the closing meeting?
7. Is it because the audit report demonstrates our value. It shows we did a thorough job of high quality. If you need to write an audit report to justify your existence there is something missing!

So why should we write audit reports?
Is there a good reason based on the value to the organization and our customers in management and on the board?
We need to provide them with the information they need, when they need it, in a concise form that is actionable and easy to consume. We don’t need to provide them with more, making them figure out what matters and what doesn’t.
Let’s not hide our gold nuggets in a haystack of trivia.
Do you know what they need? Have you discussed and agreed on it with each customer?
As a generality, they need to know:
1. Are there any serious issues that threaten our success and that need to be addressed promptly?
2. Is there anything I need to do myself?
3. Is there anything I should make sure my team are doing? Is there anything I should monitor?
Maybe you need to write a report. Maybe you don’t.
Maybe you only need to write a memo that confirms what was discussed at the closing meeting.
Maybe you can rely on regular quarterly meetings with senior managers and the board where you share and discuss the information they need.
Maybe you have more open discussions with senior management after each audit – maybe not after every audit, but after a few or when there are serious issues.
But you need to know what information they need and when.
You need to have a valid business reason for any and all communications.
Don’t waste their time or yours. When they know that you are only bothering them and asking for their precious time when it’s important, you will have greater credibility and trust.
But help them do their job with the assurance, advice, and insight they need from you when they need it.

What is your opinion?
Lets talk – CPA Japheth Juma @ Twinj Insight Accounting Solution

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