3 ways an Auditor can upset an Auditee

I have been in auditing long enough to state that a bad audit can never be undone or replaced. Auditors are assigned to render value-adding services to internal or external clients.

A good auditor is someone who has mastered total quality management which consists of executing an audit right the first time or not at all.

A few years ago, after executing numerous audit, I went through a process of understanding what goes into the mind of an auditee during the course of an audit. In order to obtain a first-hand experience, I joined a multinational corporation as a Group Reporting Accountant where I was involved with financial reporting and financial management. During this time, we had our annual audits done by a reputable auditing firm. There were several instances, during the course of the audits that my colleagues and I felt that the auditors did not meet our expectations. I have listed 3 (three) missteps that these auditors committed that we (auditees) felt were below par.

1. Inability to clearly define the purpose of the audit engagement.

purpose-findyourwhy-v3-300x300Unlike what most auditors believe, the expectations of auditees vis-a-vis the auditor is to have a clear understanding of the purpose of the audit engagement. An auditee expects an auditor to clearly define why he/she is her for the audit and what outcome is expected. The objective should be concise and succinct without any auditing or financial jargon. I noted that internally, the purpose of the audit communicated by regional management sounded more like a performance evaluation than an audit. It could be construed from the numerous communication trail that management expected us to do our job well and the audit was an assessment of this objective. Most auditors do not clearly communicate the purpose and scope of the audits to the auditees leaving a vacuum that usually leads to miscommunication.

2. Limited to no knowledge of the business processes and products.

Prior to the audit, we made the necessary preparations to ensured that our documents were properly filed. We also provided process descriptions as well as process flow diagrams well in advance. know-your-clientHowever, we could tell from the questions and follow-up inquiries by the auditors that they did not fully understand the processes and products.

We (as auditees) could easily identify the weakest link in the audit team. We expected the auditors to add value, challenge our processes and recommend solutions that would help us save time and money, but we ended up with a mini-induction training for the auditors.

Knowledge of business processes and products are critical to an audit. An audit report loses all its credibility if the auditee assesses that the auditors were not knowledgeable about the processes and products of the entity being audited.

3. Using generic work papers that are not applicable to the entity under review.

Two days to the close of the audit, the auditors sent me an email stating that certain information/ documentation was pending. Since this coincided with my quarter close reporting, I decided to provide the information to the auditors. To my greatest dismay, I found out that the information that was pending related to areas that were not applicable to our business. As a former auditor who was being audited, there is nothing more frustrating for an auditee to labour and search for information that has no relationship with the business processes or activities.

At this point, it became clear to us that the work papers used by the auditors were generic work papers.

By Ransom Nformi

Ransom is a Certified Internal Auditor (CIA) and an established 10-me-freshAccounting, Finance and Auditing professional with more than 15 years experience.

Ransom’s experience spans across several countries and continents.