An article appeared in front of me today titled "How to avoid an audit". My initial thought was "how bold; an article telling people on how to avoid an audit". My second thought was more some people that I know who could have contributed to such an article.
Thankfully, the article by Modern Restaurant Management (which can be read here), provided some great suggestions and basic tips on what business owners can do to minimise a visit from the IRS.
However, the headline triggered some memories of clients who, almost actively, would avoid an audit. From personal experience, I can think of a handful of instances where a client would continuously decline meetings, avoid phone calls, and in one instance, even have the auditee walk out of the staff kitchen when I walked in. You could say this is reflective of how I approached a client at the start of the audit, or it could be the nature of the audit topic, nonetheless, these people tried their level best to avoid an audit.
Again, in my own experience, there are three key themes which stood out why these people so actively avoided an audit:
They didn't care;
They didn't see value; and
They felt 'over audited'.
A breakdown of the three themes:
They didn't care
It has to be my favourite line I have ever received. We were scoping an audit relating to Performance Management. A sensitive topic, made even more sensitive by the fact we wanted to review individuals performance ratings and associated bonuses. It was a known issue that the business has increasing absenteeism, bonuses costs were increasing each year, sales were beginning to plateau, and people generally weren't completing the performance management program yet still receiving a bonus. What we found during the planning phase absolutely astonished us, with the issue being far bigger than we anticipated, however it was the response from the Head of Corporate which astounded us: "You need to understand all these people will retire within the next few years... let them go nicely". Despite the fact Corporate's budget had blown out massively as a result of this, the lack of care amazed us, and this was shown. As the signatory to the audit, we could no progress with fieldwork until the scope had been signed and all standard procedures followed, despite having the blessing of the audit executive, and audit committee. The audit eventually progressed, however the ability to finalise observations and recommendations proved just as challenging. A poll posted by Internal Audit 360 in the facebook Internal Audit Group showed that of the 19 respondents, 13 of them felt pressured in some way to change or modify audit findings. I am ashamed to admit, that whilst our observations did not change in anyway, our recommendations were certainly watered down. Thankfully, with the support of the audit executive and audit committee, the recommendations were kept open for a significant period of time until we thought the results had improved.
They didn't see value
Generally, business areas or clients may feel they already know what is wrong and what can be improved (and this is probably true). In these situations, they just don't see audit adding any value.
They feel over audited
In one situation, I completely agree. The business area was audited for times a year by internal audit (2x spot reviews, 1x main review and 1x controls review). In addition, this particular area also had to deal with the external auditors (Deloitte), and KPMG was engaged to help with a purchase that had been made. Whilst I agree this one area was over audited, sometimes perception v reality means the business area may not actually be over audited. Furthermore, they may not understand the difference between internal and external audits. It could be argued that in some instances, a person's behaviour may be the result of two or more of these themes.
So how can we help people embrace an audit, rather than avoid it?
Here are some of my tactics:
Engage early
Talk to the business area as early as possible and make them aware that an audit is planned. They should already know about the audit had proper annual planning consultation been undertaken, however they may have forgotten. Either way, letting them know again well before we start audit planning, well let them have time to think about the review and prepare for it.
Promote everything
Explain and promote to the stakeholders the key parts of the review:
Why are we doing this review?
What is the purpose of this review and what are the be?
How is the review going to be undertaken?
Where is the report going?
When is this being done and when is it due?
Its only a starting point, but this will answer many questions your business area may have.
Furthermore, promote your experience in doing similar audits, work in the industry, or prior reviews within the business or business area. By demonstrating and promoting that you have the skills and competency, the client may see that you actually will add value.
Make it exciting
They may not enjoy their job, and I doubt an audit will help increase their enthusiasm or care for the role, but don't make the audit boring. Get the person(s) involved in the review through active buy-in and alternative approaches to performing the review or presenting the results. Use of interactive workshops are a great way to bring multiple people together and conduct fieldwork in a non-stereotypical way. Workshops should always be performed with caution though, as certain personalities always may clash and be counter-productive. A great guide on workshops by Thinking Audit can be read here.
Check-in
Regularly check-in with the business area. Show them what you have done, what you will be doing, and what you have found. Taking the business area or individual on the journey with you will help avoid any resistance at the end of the review, and will hopefully keep them engaged, and interested, throughout the review.
At the end of the day, we do not want clients or individuals avoiding an audit. We need to change our perception as auditors so that people do not fear or loathe us, but rather embrace us and seek to learn and grown from the experience of being a part of audit (not being audited).
I would love to hear your experiences on people avoiding an audit, but also your suggestions and tips on how you can better manage these situations.
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