Chapter9

Chapter 9
QUESTIONS
1. Explain the elements of the CCCER/5C model.
The CCCER/5C Model is widely used by internal auditors to document internal audit findings. It consists
of Criteria, Condition, Cause, Effect, and Recommendations.
2. What constitutes criteria and how can operational auditors identify it?
When performing financial reviews, the criteria would consist of relevant accounting and financial
standards that dictate the recording of transactions for financial statement purposes. Criteria can also
be established through external expectations like those encapsulated in government laws and
regulations. Others are based on internal expectations such as those defined in the organization’s
policies and procedures that govern employee conduct, the use of company resources, and procedures
describing how control activities or operational activities within a process should be performed.
3. What constitutes the condition and how can operational auditors define it?
The condition refers to what the auditor discovered as a result of applying auditing procedures. It is the
factual evidence that the internal auditor found during the review. Internal audit procedures include
gathering testimony, reviewing documents, observing the work conditions and dynamics, and
performing calculations of important figures, where applicable.
The finding exists because there is a difference between the criteria and the condition. What is
happening is not what should be happening, so this creates a deficiency that warrants reporting.
4. What constitutes the cause and how can operational auditors find it?
The cause is the reason the condition exists. The cause explains why there is a difference between
expected and actual conditions. Internal auditors should search for and identify the root causes of the
condition. Failing to do so will result in the auditor working with the symptom(s) of the problem and in
the end making inadequate recommendations that provide an insufficient solution.
5. What constitutes the effect and how can operational auditors calculate it?
The effect constitutes the consequence of the condition identified. It relates to the risk or exposure the
organization, program, process, or others will face because the condition is not consistent with the
criteria. The effect is the impact resulting from the problem itself. A helpful approach to document the
appropriate effect.
6. What constitutes the recommendation and how can operational auditors formulate it?
The recommendation is the action, or collection of actions, that if successfully implemented, will
neutralize the cause, stop the effect, and restore the condition to the desirable state (i.e., criteria). The
effectiveness of the recommendation will depend on the auditor fully capturing the details about each
of the components of the CCCER model. By elaborating sufficiently on each of the components, the
finding will be convincing and compelling so that the reader comes to the same conclusion as the
auditor who identified the deficiency.
7. Explain three methodologies that can help operational auditors find the root cause of operational
deficiencies.
8. List three actions that can help to make findings and recommendations more persuasive.
Quantify as much as possible.
When internal auditors write reports and fail to provide data that support their arguments, the reader is
left wondering whether there is really a problem. The auditor should tell the reader, as much as
possible, how big the problem is in monetary terms, number of units, percentage of transactions
affected, how many people are impacted, and how long the problem has been occurring. Abundant and
reliable data will compel the reader that a problem exists.
Make sure findings are significant.
Since organizational management is increasingly dealing with complex and worrisome risks, managing
large volumes of transactions and monetary amounts, and faces constant time limitations, they should
not receive audit findings pertaining to minutiae.
Consider the cost/benefit involved.
Every activity carries some risk, and organizational leaders understand there are some costs of doing
business. These risks can’t be excessive because they come in conflict with the principle of prudence and
fiduciary responsibility to protect the interests of their stakeholders, especially owners. Remember that
costs can be monetary, but also reputational or precedent setting, in that they can create an opportunity
for the same action to be replicated at other times, at other locations, or limit the effectiveness of
control activities in the future. With this in mind, internal auditors should evaluate quantitative and
qualitative costs and benefits in an effort to refrain from presenting problems that are not particularly
significant and require a higher cost to correct.
9. Explain the use of logic, character of the presenter, and emotion as tools for persuasion.
Logic and emotion are the two elements that make for perfect persuasion. We can be persuasive using
only logic or only emotion, but the effect will be short-term and unbalanced. Emotions create
movement and action. They generate energy during the presentation and get prospects to act on the
proposal being presented.
10. Explain three tactics used to persuade, distract, and divert the attention of others. How should
operational auditors use this knowledge to prevent being manipulated themselves?
The Standards state that “Internal auditors must communicate the results of engagements” (Standard
2410). Reporting audit observations are a key requirement for internal auditors, and the board and
management expect internal auditors to be their “eyes and ears” about what is happening in their
organizations. They trust the accuracy, completeness, and timeliness of the information.Beyond
identifying and providing a laundry list of problems, however, audit clients expect internal auditors to
provide timely, useful, relevant, and feasible recommendations. These recommendations should help
the organization restore the deficiency so it meets the performance expectations. It can, however, help
the organization go beyond the minimum performance requirements and propel it into the territory of
leading practices. By going one step further, competitiveness is enhanced and the organization perceives
that internal audit is adding value beyond its baseline expectations.

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Chapter 9

Make sure findings are significant.

Consider the cost/benefit involved.

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