The report can only be as good as the audit itself
Enjoy this excerpt from the self-study course - Audit Reporting: Yellow Book Style available at www.yellowbook-cpe.com
THE REPORT CAN ONLY BE AS GOOD AS THE AUDIT ITSELF
One of the most common reasons that an audit report is so painful to create is that the audit failed. Yes, I am using very strong, emotional language—failure.
One of my favorite postcards is of the Leaning Tower of Pisa. And the caption reads, “Nice façade, bad infrastructure.” You must have both substance and style to pull off a good audit report. And the substancecomes directly from the planning and fieldwork of an audit.
A director of a large university audit shop called me a few years ago to ask me to teach his staff how to write. I started inquiring about what was going on. He told me, “Over and over again, we get to the end of the audit, and my team turns in their reports, and I have to direct them to start all over again. They completely miss the boat. They have no idea how to write, and we spend months cleaning up the mess.”
I then asked him how involved he was in the auditing process. He said that he was very busy meeting with the executive board and running the department, so he didn’t get involved in the audit process until the working papers were finished and the report was finished.
My little light bulb went FLASH! I asked him whether he would be open to expanding the length of the training and really fix the problem. He said he would be. And then I asked him if he would sit in on the training. I was very thankful that he said yes. It was one of my most effective gigs ever!
We went all the way back to the beginning of the process: to defining the audit objective. Without a good objective, how in the heck can you conclude? The conclusion is the answer to the objective.
For instance, your objective might be to determine if university faculty is using purchasing/credit cards to pay for allowable items. Your conclusion might be, “Yes, the majority of faculty are using their purchasing/credit cards for allowable items.” And the exceptions you find would possibly show up as findings with resulting recommendations.
But let’s say instead that your objective is a little looser than that. Your objective is to determine if the program is effective. AARGH. No wonder your report stinks. How are you going to conclude on that?
While I was working at the Texas State Auditor’s Office, the GAO came out with its new standards on performance auditing. Up to this point, the SAO had been conducting only financial and compliance audits.
Management was intrigued with the idea of a performance audit and decided to try one. I volunteered to be one of the first to leave the comfort of financial opinion audits and give one of the performance audits a shot.
One of our first opportunities to try a performance audit cropped up at the Texas Department of Criminal Justice, our prison and parole system. The department had decided to parole a few guys who had been sitting on death row. (?!WHAT?!?) The legislature called us and asked us to go find out what was happening.
A group of us got in our little cars and headed out toHuntsville.
At the entrance, the executive director kept asking us, “Now what are you doing here?” And we said, “A management control audit.” To which he asked, “What is a management control audit?” And we said, “It examines the five aspects of management control, including safeguarding of assets, information and communication, …” Blah, blah, blah. And he gave us a quizzical look, which we purposely ignored.
Then after a few more minutes of chatting, he asked usagain, and we gave him the same lame response. After the third try, he finally gave up—thank goodness! We didn’t know what the heck we were doing and didn’t want to admit it! Our audit objective was basically, “What’s up?” We left the entrance conference congratulating each other on a job well done.
Because we had no real focus, each of us decided to tackle a different area at the department, which by the way was HUGE! I decided, being a CPA and having a financial background that it must be about the money. So Istarted looking at the budget process. Genius. Another guy decided to look at health care for the inmates. Huh? Another guy decided to look at the littlebusinesses the department created to employ the inmates. Only one gal actually looked at the right thing. She examined the parole process to find out why dangerous criminals had been released.
After spending all summer and part of the fall in Huntsville, we came back to the office in Austin to compile the report. And how do you think that went? We finally published the report around Valentine’s Day of the following year.
Jacque was a very talented report writer, and she was assigned to help us with this project. She had the unenviable task of taking all of the disjointed results we had come up with and tying them up with a neat bow. Our project manager kept telling her, “Come on, Jacque . . . can’t you come up with a thesis or a conclusion or something?” It wasn’t Jacque’s job to do that! Right after the report was issued, she quit, saying something about us auditors driving her completely insane.
Most of the guys who were released were back behind bars after murdering a few more folks.
“What’s up?” is a very wide-open audit objective. How do you tie together all of the disparate results in a cohesive audit conclusion and report? You can’t. No way.
Having been through this experience, I was so happy that the audit director at the university was willing to expand the scope of the training. Because everyone on the staff realized that they were planning the audit at the end of the audit and that their audit objectives were so vaguethat the team was spinning its wheels most of the time. When it came time to conclude, they swam around some more and planned some more. And often foundthat they had to go back and do more fieldwork. What a mess!
Need your Yellow Book hours? Www.yellowbook-cpe.com offers a variety of interesting, fun to use self-study courses that can be completed electronically at your convenience. Yellowbook-CPE.com is now NASBA certified.
Governmental auditors unite! Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of “The Yellow Book Interpreted” and owner of Yellowbook-CPE.com 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.