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The seven deadly sins

Posted by Gary Emery | Answering your questions | May 31, 2013
Common pitfalls or traps that auditors need to avoid slipping into

deadly sinsWe’ve probably all heard of the seven deadly sins – we may even have committed more than one! But this blog doesn't deal with the well-known seven deadly sins – it focuses on the seven deadly sins of performance auditing, as described by Stuart Kells of Monash University, Australia.

Kells looked at common issues or "sins" that performance auditors need to avoid. Having considered his deadly sins, I think they apply to all forms of auditing (including financial, internal, and compliance-based auditing).

Kells researched information from Australia, Canada, the UK, and other countries, and this is what he came up with...

Anti-innovation

The sin here is making recommendations that actually reduce effectiveness and block or discourage innovation. Recommendations that could lead to excessive formal controls and procedures are also a big no-no.

Auditors, to avoid this sinful pitfall, you need to stay up to date with developments in the area you are auditing, recognise and encourage innovation, and focus on improvement rather than censure.

Nit-picking

This is the sin of focusing too much on the small things – the minnows instead of the sharks and whales. You might become lost on the path to audit salvation and be constrained by concerns about straying into policy. You might be excessively adversarial, resulting in reduced "buy-in" from the entity.

So what’s an auditor to do? Well, focus on the big issues! Conduct your audits in a constructive, courteous, and professional manner, working on the basis of no surprises. Inform the entity of what you're finding, and allow for natural justice and fairness by listening. Where appropriate, amend your findings based on the new information you receive.

The expectation gap

Sinners, don’t be tempted to over-promise what your audit can deliver. It could be seen as providing more assurance than it does, or you could overstate your knowledge in the area you're auditing. This could raise faulty expectations with the entity and other stakeholders on what your audit can and will deliver.

To avoid this, always be clear about the scope and limits of your audit from the very beginning. Make sure that the entities and others know what to expect. Where there is some confusion, make sure you clarify.

The "lap dog"

Kells wants to urge his congregation to have courage. When it comes to auditing, don’t pull your punches by softening or concealing some of your more adverse findings. You must report what you find. Don’t get too close to the entity you are auditing. It could compromise your independence.

Make sure as auditors that you follow your mandate and confirm your independence from the entity. Ensure that you're objective with your findings and recommendations – report the good and the bad. Your reports should be clear and not ambiguous, so they can't be misinterpreted.

Unnecessary systems

For this sin, look at what you find from the entity’s perspective. Don’t just recommend systems because they may be "auditor friendly." If the systems you're considering wouldn't be effective or efficient for the entity, think again!

Committing this sin could cause entities to over-invest in preventing minor problems and, as an auditor, your recommendation could be flawed.

To mitigate this, base your recommendations on positive outcomes for the entity. Where possible, try to reduce red tape. It’s a good idea to test your recommendations and do a reality check to ensure you’re focused on improving the right things.

Headline hunting

Auditors should not seek the limelight for themselves or their work. Do not, my friends, try to make front-page news with your findings. Neither should you shoot or bayonet the wounded. Focus on the future and what improvements could be made.

Always be balanced and objective. Ensure that your findings and recommendations add value and show insight.

The hollow ritual

The final sin auditors need to avoid is seeking to serve the interests of either the auditing organisation or the entity being audited. This would mean the audit couldn't focus on what the entity could do to improve services to the public, or ensure efficiency savings so public services are better value for money. In short, the audit could not result in substantive benefit and be value for money in itself.

Make sure there is an external or peer review of the value of the proposed audit. Another good way of assessing the effect of the audit (and subsequent audits) is to follow up to assess its effect at some point in the future.

So, there you have it. My interpretation of Stuart Kells’ seven deadly performance audit sins. They highlight what a tricky business auditing can be. When the above sins are avoided, then performance audits can bring many positives.

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