There are many questions that likely come to your mind when you first kick off an audit. You may ask yourself why the audit was picked, how it found itself in the audit plan, and what the achievable outcome should be. If these questions aren’t crossing your mind before you start an audit, chances are you’re flirting with failure.
As the International Professional Practices Framework states, “Objectives must be established for each engagement.” Practice Advisory 2210-1 states that the objectives, for planned audits, “proceed and align to those initially identified during the risk assessment process from which the internal audit plan is derived.”
Presumably, a good risk assessment and audit planning process will only place critical or high-risk audits on the plan. Since audit resources can be limited, they should only be directed to the best audit candidates.
Start With the End In Mind
How many times have you started an audit with an unclear purpose or objective? Have you been in an audit situation where audit management has told you to go in and see what you can find?
The reason many audits are unsuccessful is that the objective has not been stated or understood by the audit team, or even stated or understood by audit management.
When it comes to understanding your audit’s objective, it’s important to recall the old saying that you “start with the end in mind.” By knowing what you want to accomplish, you’ll know where you want to end up.
And remember, audit days can be compared to a budget. Unless your money is unlimited, you wouldn’t start spending it without having a reason or a purpose. Why should the approach be any different with an audit?
Establish Your Objective
Before you undertake an audit, you should have a clear discussion with audit management.
To have a successful audit you need to know what success would look like for the audit. A couple of key questions to keep in mind include:
- What does your audit customer expect?
- What do they want for the money they are spending?
The cost of one audit day can range from $1,200 to more than $2,400. This means that a team of three auditors who are not addressing the audit objective could result in a cost for the organization that ranges from $6,000 to $12,000 a week.
Think of Your Objective as a Question
The audit objective can be stated and should be thought of in two ways.
Let’s assume we’re conducting an audit to find out how long it takes to deposit receipts. In this case, the objective can first be stated as follows:
- “The objective of this audit is to determine the average time to deposit receipts.”
This is clear and straightforward. You know what you are expected to do. The audit objective, however, can also be stated or worded as a question:
- “The objective of this audit is to answer the question: “What is the average time to deposit receipts?”
When worded as a question, it helps us further focus the audit. The audit should be designed to answer that question. If we are doing something on the audit that doesn’t help answer the question, maybe we’re losing focus.
Everyone on the audit team should know that question. Try pinning it up in your work area! The goal of your work should be aimed at answering that question.
Answering the Question
Remember, when you start the audit, the goal is to answer the question you formulated based on your objective. Our planning and risk assessment should be designed around that question. Sawyer’s Internal Auditing states that “Objectives are what one aims at – a purpose or end.”
Scope creep occurs when we lose focus and start looking at items that don’t help answer the question. The scope sets the bookends for the audit. We are answering the question for the period or the unit that the scope defines – that is what we are taking responsibility for.
What is the average time to deposit receipts during the three-month period ending June 30, 2017? Scope creep takes us away from that question and that specified period.
Let’s say you find something during your audit that you feel should be considered. Remember, your job is to answer the question you were given. Other items need to be brought to audit management’s attention. They determine where audit hours/days are to be spent – not you. Keep a list of those items and notify your supervisor when you come across them, but don’t pursue them without supervisory approval.
To have a successful audit outcome, it’s imperative to understand the objective of your audit. Keep your focus on the end result. Speak with your supervisor, speak with your customer, and be sure everyone is on the same page with the expected outcome.
 Assuming an annual salary of $60,000, a 30 percent fringe benefit rate and 180 work days a year. 1.3(60,000)/180 = $433.
To learn more about this topic and others, attend the highly-anticipated SuperStrategies Conference & Expo in Las Vegas, Nevada this November.