Getting to Know and Love the Elements of a Finding | AccountingWEB

Getting to Know and Love the Elements of a Finding

The elements of a finding are so core to planning, performing, and reporting on an audit, it is going to take me several bog posts to say all that needs to be said. In this post, we will just get a sense of what the elements are. In future posts, we will talk about how to use them in planning, fieldwork, and reporting to control the audit process. To view the supplemental video, visit my site

What are the elements of a finding?

There are five elements of a finding:

Where did these “elements of a finding” come from?

Greek philosophers outlined the elements of a persuasive argument centuries ago.

Some smarty pants (and I say that in a complimentary way!) at the GAO (Government Accountability Office) was wise enough to include the elements of a persuasive argument in the Yellow Book (Generally Accepted Government Auditing Standards) and rename them as the elements of a finding. If you are conducting a Yellow Book audit, you are required to include these five elements in your report.

Strangely enough, the AICPA is silent on what should be included in a management letter comment or as I call them, findings. In my opinion, this is one of the major weaknesses in the AICPA’s Statements on Auditing Standards … but they didn’t ask me!

Why bother with the elements of a finding?

The Greeks and the smarty pants at the GAO realized that there are a few key pieces of information that everyone needs to know about an audit issue.

Each of the five elements has a purpose—clears something up for the reader—and should not be left out. If you leave an element out, you leave the reader hanging and pondering unanswered questions.

What questions do the elements answer for the reader?
Condition: What is the problem/issue? What is happening?
Effect: Why should the reader care about this condition? What is the impact?
Cause: Why did the condition happen?
Criteria: How do we, as auditors, know this is a problem? What should be?
Recommendation: How do we solve the condition? The cause?

A few rules about using the elements
1. Use only one of each. For each finding, choose only one sentence to represent each of the elements. This will keep your finding tight and ensure logical organization. If you add several conditions, effects, or causes, you will confuse and lose the reader and probably yourself, too!

2. The elements must match. The recommendation matches the condition and cause. In other words, the recommendation must resolve the condition and the cause. To make your argument very clear, use the same terminology in the condition and the cause that you do in the recommendation.

For example, let’s say that you have been auditing the cash disbursement function. You found that the accounting department hasn’t been performing cash reconciliations on a large bank account for the past six months. The clerk who was performing the reconciliations earlier in the year got a new job and no one took over her duties.

Because there are a large number of transactions in the account—about 400 a month—you are concerned that some errors have been made. The account has a maximum balance of $1M. The bank has assessed several bounced check fees totaling $225 so far. Luckily for you, the auditor, the entity has a written policy requiring that cash reconciliations be performed each month.

Here is what an initial finding might look like:
Condition: Accounting not performing cash reconciliations for 6 months
Effect: Bank assessed bounced check fees of $225
Cause: No one is assigned to perform the reconciliations
Criteria: Accounting policy number #724
Recommendation: Perform cash reconciliations. Assign someone to the task.

Notice that the terminology used in the recommendation mirrors or matches the terminology in the condition and cause. Also notice that at this point we are not creating full sentences. Don’t invest time in crafting full sentences until you are happy with the outline. We will work with this finding more next month because I am not finished with it yet!

This blog

Governmental auditors unite! Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of “The Yellow Book Interpreted” and owner of a website devoted to training for governmental auditors. Whether you are an internal auditor or monitor for a government entity or a CPA doing grant audits, you will enjoy Leita’s humorous take on the complexity of auditing in the government environment.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.


Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.


Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.


Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".


William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.


Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (, a software development firm of high-volume, high-productivity accounting and payroll technology.


Eva Rosenberg, MBA, EA, is the publisher of, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.


Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website:
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.


The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.


FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.


Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.


Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of a website devoted to training for governmental auditors.


AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish share their ideas, insights, and perspectives from across the pond.