Beyond Audit Auditing Remotely and Delivering Value Wiley Corporate Fa 1St Edition Robert L Mainardi Full Chapter
Beyond Audit Auditing Remotely and Delivering Value Wiley Corporate Fa 1St Edition Robert L Mainardi Full Chapter
ROBERT L. MAINARDI
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10 9 8 7 6 5 4 3 2 1
To my parents, Angelo and Lucy, who watch over me. I hope they are proud of
the son, brother, friend, and father they raised. And to my children, Robert and
Gabrielle, I will never stop loving and supporting you … always believe
in yourselves.
Contents
Preface xi
Acknowledgments xv
vii
viii ◾ Contents
Index 227
Preface
F
OR OVER THREE DECADES , I have been actively working in an
internal audit department or partnering with them to create the most
effective and efficient audit operations. That operational efficiency
measure has given way to determining if these departments are truly focusing
on the most critical risks their company is, might be, or could be facing. Too
often, internal audit departments get caught in a “drone army” mentality and
focus on moving the audit coverage forward without building any additional
business process knowledge or providing guidance to improve the overall
business process. While coverage is important and should be considered,
examining all aspects of an internal audit operation will prove to be invaluable.
At the time this book was written, companies and their employees are
developing plans in the hopes of resuming normal business operations and
activities. This is an excellent opportunity for internal audit departments
to pause and consider not only how effectively they execute their corporate
responsibilities, but also how much risk permeates in each phase of their
audit process as well as their entire audit methodology and the successful
compliance and execution of same. Throughout this book, there are references
to the Beyond Audit methodology, which has been developed to provide
insight, guidance, techniques, suggestions, and templates to improve your
current audit methodology. Additionally, it will introduce the Audit Risk
Barometer, which was created to allow audit departments to independently
and objectively assess their operations through a review of six individual and
distinct categories and deliver an overall audit process risk assessment to focus
and create targeted action plans to address opportunities for improvement.
The risk barometer facilitates an in-depth view of your current audit function
from the current methodology to the delivery of your audit products, which
generates the detailed support for the overall risk score and blueprint to address
the most impactful enhancements to improve the audit function.
This book addresses the need for internal audit departments to focus on
improving their own process in the new remote audit environment to ensure
xi
xii ◾ Preface
they are working in partnership with the business owners to gain a clear
understanding of the business objectives and gather all pertinent information
and data to provide value-based recommendations which result in real change.
The only way to facilitate change is to ensure that the audit department recog-
nizes the critical skills required to be successful in the execution of remote audits
and continues the development of those skills to improve audit performance.
It should be noted that at the conclusion of each chapter, there will be a
link provided that will allow the reader to view a video summary of a particular
skill, technique, or template discussed in the chapter and or an interview with
a subject matter expert examining the concept that was detailed in the chapter.
Chapter 1 provides a discussion regarding the current state of internal
audit departments around the globe and the corresponding challenges they
are encountering when trying to execute and complete their audit plan, often
with only virtual access to their business partners. It also explains the critical
role the business partner plays throughout an audit and how internal audit
needs their participation.
Chapter 2 takes an in-depth look and analysis of being assigned to a
remote audit, especially for the first time, and all the challenges that executing
a remote audit engagement will present through each phase of the audit.
Included in the discussion will be suggested targeted techniques that provide
the audit team with the tools to stay on track and produce value focused results
and an introduction to the importance of the internal audit and business
partner relationship.
Chapter 3 outlines how to successfully market the internal audit depart-
ment to ensure all business partners understand what internal audit does
and, more importantly, why they do it. More than ever in this remote audit
environment, a clear communication of internal audit’s mission statement,
purpose, and partnership will be required to complete the audit engagement
requirements.
Chapter 4 introduces the Beyond Audit Learning Map and personal devel-
opment plan process as well as the critical skills necessary for every auditor to
develop and foster to be successful at their level in the department. And while
communication will always be a critical skill for auditors to continually develop,
there are seven other skills discussed to consider in any development plan.
Chapters 5 through 8 provide the methodology details for the three main
audit phases: (1) planning, (2) fieldwork, and (3) reporting, plus the action plan
implementation phase to facilitate change in the business process. Each chapter
defines the phase and the specific objectives and corresponding requirements
needed to comply with the audit methodology.
Preface ◾ xiii
Chapter 9 presents and explains the audit dashboard process from the
objective of the dashboard, to development, to reporting, to required actions
needed to address gaps identified using audit performance data. Also included
in the dashboard discussion are techniques to identify specific metrics to be
tracked from your existing audit methodology and the corresponding metric
criteria requirements to score metric performance.
Chapter 10 is dedicated to the critical role that communication plays in the
internal audit department especially when operating in a remote environment.
The topics covered include the communication model and the significant chal-
lenges that the message medium plays in the delivery of information between
two parties. In addition, the Beyond Audit Advisor Approach is detailed to pro-
vide a suggested technique to produce effective communications.
Chapter 11 introduces the Audit Risk Barometer, which is an unfiltered,
honest assessment of the internal audit department’s operations as it relates
to six individual categories. This self-assessment process takes the participants
through a review of descriptive statements in each category, which are com-
piled for a total category score. The category scores are then totaled to calculate
the internal audit’s overall risk score. Three different risk scores alert the inter-
nal audit team as to their department’s strengths and weaknesses.
Chapter 12 provides the ideal profile of an exceptional, self-aware,
self-validating, high-performance internal audit department by discussing
the top 10 characteristics that support this definition of a world-class audit
organization. Both hard and soft department characteristics are discussed to
create a baseline for audit departments to maintain focus, provide ongoing
team and methodology development, and improve service to their business
partners.
Chapter 13 discusses the critical and continuous role that training and
development play in every internal audit department. While auditors should
take responsibility for their own development, the audit department provides
support and the proper learning environment to ensure audit development and
success. Also included in this chapter is the Beyond Audit Learning Map, which
details the suggested courses and topics for beginning auditors to provide a solid
foundation to establish their audit skills.
Acknowledgments
E
VEN THOUGH THE D EVELOPMENT of this book occurred at such
an odd time of isolation, I still had incredible support from so many peo-
ple. I want to say thank you to all of those people, both professionally
and personally, who experienced delays in response but waited patiently as I
focused on creating this book.
I owe the biggest thanks to my son and daughter, Robert and Gabrielle, who
sacrificed the most during the writing of this book. Even though I could not
give them the level of attention they deserved, they still diligently checked in on
me to ensure I remembered that I had kids. Even with their busy professional
careers, they found time to share with me during my book development and
writing breaks, and I deeply appreciated that. You have both turned out to be
incredibly successful, and I could not be prouder to tell everyone that you are
my children. Stay focused on your goals and never give up.
Thanks as always to my brothers, Jerry, Michael, and Stephen. All three of
them provide support for me, whether it is for computer challenges, guidance,
or office needs. No matter what, I can count on one of them chipping in to help
me address the issue. I know my parents would be proud of how close we have
stayed, and I could not be any luckier to have these guys in my life.
As always, a special thank-you to Barumbi for the constant inspiration
and support throughout this entire process. From the first book on con-
tinuous auditing to now, you have been a constant every single day, and I
know I could never replace you. I look forward to continuing to develop new
approaches and concepts with you and look forward to collaborating long into
the future. I could never replace the perspective, motivation, and insight you
share with me. Let us keep this thing rolling.
No acknowledgment would be complete without including Lieutenant
Colonel Henry “Pat” Campbell. Pat has been by my side for over 35 years
since we met at Penn State, and I could not ask for a better fourth brother.
Just like my brothers, I know that I can count on Pat and his wife, Laura, any
time I need support or have any other ridiculous request. The two of you are
amazing. I appreciate everything we have shared and look forward to seeing
xv
xvi ◾ Acknowledgments
you soon. As I have mentioned to you before, I could never thank you enough
for the 21 years of service in the US Air Force. The sacrifices you made allow me
and countless others to enjoy their lives while you protected ours. I appreciate
what you have done, and the sacrifices Laura made while you were away. You
inspire me and every person you meet. Love you, brother.
In an unexpected acknowledgment, I must recognize three men that I lit-
erally owe for saving my life. How do you recognize and thank someone for
keeping you alive and above ground? Words do not really seem like enough,
but I will give it a try. To Dr. Martella, Dr. Sacchetti, and Dr. Tarditi, thank you
a million times over for identifying, correcting, and providing me the absolute
best care in fixing an unknown congenital defect that I was born with and no
one, except for you, noticed and replaced just in time. You and your families will
always be in my prayers and I am forever in your debt. Thank you so much for
allowing me to spend more time with my children. All three of you are amazing
and deserve the highest praise.
Thanks to Jonathan Marks, who is a constant source of critical industry,
business, and professional knowledge and always dedicates the necessary time
to provide insight into any topic. His intellectual property delivers a focused
vision for the most effective way to understand and analyze a process. He is
not only an invaluable source of intelligence but also a great friend. We have
collaborated on many learning events, presentations, and projects, and I look
forward to continuing those efforts going forward.
Thanks to my financial team, compiled of one amazing man, John Smith.
Mr. Smith, aka Sma Sma Smitty, is not only my business associate but also a
great friend. I appreciate the input, guidance, and support you have provided
to keep me in the game for over 13 years and am looking forward to our next
adventure.
Thank you to my long-time friend, Dino Borghi, at Borghi’s by the Bay in
Stone Harbor, New Jersey, for always taking care of me, my family, and busi-
ness associates with unbelievable meals and unmatched service. It is beyond
fun cooking and working with you, as well as hanging out to do things we prob-
ably should not be doing. If I have to make a bad decision with anyone, you are
it. Give me a Hunge. You are the best.
As I acknowledged in my last book, there are so many business partners
and audit team members that I have collaborated and worked with over the
past three decades, and I truly appreciate all their hard work and contributions.
Thank you all for the support and effort that you provided, whether it was to
deliver a quality product to improve a business process or enhance the skills of
a particular audit team. I look forward to partnering with you again in future
endeavors.
About the Author
A
FTER TWO D ECADES IN the internal audit profession, Robert
started his own company in 2007, which partners with internal
audit, compliance, fraud, and business professionals to develop
and facilitate custom training as well as provide resources and assistance
in evaluating, creating, and implementing formal audit methodologies and
effective business processes. Prior to starting his company, Robert worked in
six different internal audit departments, most recently as the vice president
of Internal Audit for the Penn Mutual Life. Prior to joining Penn Mutual, his
work history included The Vanguard Group, Aetna, Prudential, Advanta, and
GMAC Mortgage.
As a professional keynote speaker and facilitator, Mr. Mainardi leads
programs to:
xvii
xviii ◾ About the Author
University. Plus, he has merited the Six Sigma Green Belt certification from
the American Society for Quality, which recognizes the recipient for unique
expertise in problem-solving and statistical analysis. He also has earned the
Certified Financial Services Auditor (CFSA), Certification in Risk Management
(CRMA) designations, and the Qualification in Control Self-Assessment.
What Happened
1
CHAPTER ONE
T
H I N K B A C K F O R A MO M E N T. Do you even remember the begin-
ning of the year 2020, which started with such promise? You probably
made a couple of New Year’s resolutions. Maybe it was something
about your weight, exercise, or even your job. At work maybe you made a
commitment to improvement. This was going to be your year – you were going
to seek opportunities to lead jobs, take a leadership position, and maybe even
get promoted. No matter what goals you set for yourself, you were certain you
knew what you needed to do and how you were going to get there. You had
a plan.
The one factor every person has to consider when making a plan is to
ensure that all possible and potential roadblocks to achieving the goals are
identified and considered. Now, while there is no way to consider, document,
and explain every reader’s personal goals, I can definitely speak on the
objectives of an audit department. For more than three decades, I have been a
team member in an internal audit department and/or partnering with them
to create the most effective and efficient internal audit operation. And while
each department is unique, the methods, direction, discipline, execution, and
oversight of the operation remains the same. So, let us focus on the audit
department and how they entered the year with a plan and an energetic team
filled with optimism.
In the same vein that an individual would set yearly goals, so does the audit
function. The chief audit executive meets with the leadership team and dis-
cusses the company’s direction and how the internal audit department is going
1
2 ◾ What Happened
to partner with each of the business leaders to ensure the operations in every
division are being completed in the most effective and efficient manner. And
in order to provide that validation, internal audit will ensure that the process
design, implementation, execution, reporting, and oversight are producing the
intended outcome, no matter if the result is a physical production or a process.
The audit chief knows the key to delivering a value product to their clients is
to recognize that each process will produce an outcome; however, the internal
audit team must verify and validate the outcome is the intended or desired out-
come according to the business process requirements. With the stated objective
to provide this type of specific value to their clients, audit departments realize
the discipline, focus, effort, and dedication it takes to deliver.
When the audit leadership team reviews all of the pertinent business activity
data and comes together to discuss and create the annual plan, they consider
the barriers the team will face to produce their quality product. These barriers
include, but are not limited to, available hours both from a team and client per-
spective, data identification and availability, auditor experience and business
knowledge, allocated time, as well as unplanned events. Now, I can assure you
that when the audit leadership teams got together to build their 2020 plan,
many challenges were discussed that could stand in the way of completing their
audit plan. However, having the country shut down due to a virus was definitely
not one of them. That being said, the audits that were in progress and the ones
that remained on the plan when this pandemic hit the country must be com-
pleted. Multiple partners, both internal and external, need and rely on the audit
results in order to plan the company objectives moving forward. But how is an
audit department that relies on information, communication, and data from
its business partners expected to complete the audit assignments when mem-
bers of the department are no longer in an office where they can interact and
obtain the necessary and critical information required to provide the quality
validation of business operations?
As with any unplanned event, barrier, or obstacle, the team must adapt
and improvise in order to overcome the challenges encountered and complete
the assigned tasks. But how does an audit team or an auditor go about getting
the critical information without meeting with the client to explain the needs
and requirements in order to complete the job not only effectively but also
Audit Execution Challenges ◾ 3
accurately? Any auditor, whether experienced or not, will tell you that the
internal audit and business partner relationship is the key to unlocking access
to pertinent data and insight into the business process under review. Why is
this relationship so important? The bold fact of the matter is, no one – either
at work or in your personal life – is going to give you information regarding
what, when, and how they do what they do unless they know and trust you.
That is just human nature. And in your work life as an auditor, you already
know that you are not going to be a person whom the business teams look
forward to seeing on a regular basis. It is a stigma that has followed auditors
since the beginning of the profession. In its simplest terms, auditors are there
to ask the business personnel questions and verify that they are completing
their assigned tasks as described, hopefully, in the policies and procedures.
While the task at hand seems simple, any auditor will tell you it is a lot more
difficult than it sounds – a prime example of saying it is so much simpler than
doing it successfully.
So how does one accomplish this task of information gathering and
knowledge development if they are unable to meet with their clients in person?
This is where the auditor’s job becomes 10 times more challenging than it
was before the pandemic. The focus of audit departments worldwide has
shifted in the second and third quarter of 2020. It went from analyzing data,
partnering with a client to explain deviations, and developing value-added
recommendations to identifying new ways to obtain the necessary information
to do their jobs.
All internal auditors recognize the value that the business-level data has
in the successful execution of audit engagements. Audit teams have become
much more aware of how important communication, relationship building,
and marketing the audit department has become in this new remote environ-
ment. For so long, internal audit departments have not placed enough empha-
sis on marketing their department in an effort to establish a strong foundation
to build business partner relationships. If audit teams thought it was challeng-
ing before to get information from their business partners, they now face brand-
new hurdles to leap over when it comes to acquiring data and information in
this remote audit world.
The change that has been thrust upon the audit industry was not one that
could have been predicted, but it certainly must be addressed if audit teams
want to be successful going forward. There has been speculation that this
remote environment could last through the coming year. If it was not evident
before, each corporate executive and members of the corporate committees
4 ◾ What Happened
realize the critical role the audit department plays in the company and how
much the business teams, regulatory bodies, external auditors, executives,
and investors rely on the information produced and distributed from the audit
teams. In order to address the needs of their internal and external clients, audit
teams should take a step back and perform a self-evaluation of their internal
process to ensure they have the following:
person will always work harder and be more flexible to ensure the relationship
continues to grow and stay strong. Auditors must realize early on in the
relationship development process that we are the party recognizing we will
have to work harder and be more flexible than our business partner to ensure
the relationship stays strong and intact. What I must clarify for you is in
recognition that the auditor must put in more time, effort, and dedication to
foster the audit and client relationship. It does not mean in any way shape or
form that the auditor should bend the rules or requirements during the audit
itself. During the engagement, the auditor should keep the business partner
“in the know” and ensure the work, status of project request, completed
testing, preliminary results, and any potential issues should be reviewed,
discussed, and validated with the business partner to ensure they are never in
the dark when it comes to the audit status. While this might seem like common
sense, there are often times when auditors forget to communicate the details
of potential findings or work statuses. Surprises are fun and usually a good
thing, except during an audit. If you want to keep your relationships strong
with your business partners, always remember the role that clear, prepared,
supported communication plays in developing, fostering, and maintaining
relationships. Too often, auditors enter into exchanges (formal meetings or
hallway discussions) with clients unprepared. I know this is not something you
would do, but let us discuss the potential impact not only on the relationship
with your client but also the development of the auditor.
A critical point that must be emphasized here is being prepared. You can
never be too prepared for a meeting. Believe me, I know all the excuses for not
preparing effectively for a meeting. You could say, I do not want to prepare
too much because it will come off disingenuous. That is false. Being prepared
does not mean to memorize what you are going to say. If you memorize
what you want to say it will come off as fake and robotic. However, if you
prepare effectively, it will show you are committed to the topic, understand the
details, know where the data originated, and can effectively explain questions
regarding the subject matter. If you do not adequately prepare, how will you
know when to stop asking questions or when you have the information or data
required? The keys to effective preparation for any meeting with a client are
understanding the meeting objective and mastering the data to be discussed.
With these two keys, any auditor can effectively and confidently communicate
with the business partner. So, let’s touch on both, briefly, to ensure everyone is
on the same page.
Critical Meeting Keys ◾ 7
You would be surprised how many auditors go into a meeting with a client
without a meeting objective. As a thirty-year audit veteran, I will tell you there
were times when I relied on my experience to carry me through meetings.
Because I have been in hundreds and hundreds of meetings over my career,
I would tell myself that I would just “shoot from the hip” and use my “vast”
experiences to get through a meeting. What a mistake! As I got older and
hopefully wiser, I discovered no amount of experience can replace understand-
ing the meeting objective and being prepared to discuss and drive targeted
questions to address the meeting objective. Keep in mind, the meeting objective
is the purpose or reason you are having this meeting. Objective as a noun will
always mean purpose. Put yourself in the business partner’s shoes. They will
be thinking, why does the auditor want to get together to discuss this topic?
When you enter a client meeting and clearly understand the objective, you
are focused, recognize the questions needed to effectively facilitate, can keep
the meeting on track, and know when sufficient answers and evidence have
been given to address the objective. If you enter a meeting without an objective
or just with a list of questions, the meeting will feel disjointed, unorganized,
and ultimately have a negative impact on the relationship. It relays a sense of
unpreparedness to the meeting participants. You may have a list of questions
to ask your business partner, but there is always a reason you are asking those
same questions.
Starting the meeting by stating the specific objective creates that sense of
purpose and communicates to your business partner the need for attending.
Once the objective is clear, the discussion and questions that follow must link to
the specific meeting objective that was explained at the beginning. This under-
standing of meeting purpose focuses the auditor and helps direct the conver-
sation in a positive direction to the outcome. At the end of the meeting, there
is a sense of conclusion for the information needed as well as completion for
that part of the audit. That sense of accomplishment, even the smallest achieve-
ments, make a positive impact on your business partner as they see a focused
audit team effectively using time to complete the tasks at hand. Additionally,
the auditor and audit team project a confident, unified approach as they exe-
cute their audit methodology.
The second key is mastering the data. While mastering the data may seem
like a simple concept, understanding its value is a must. No matter what the
8 ◾ What Happened
audit assignment or task is, most auditors do not take the necessary time to
build their business knowledge. Let’s be honest with each other. How many
times have you been placed on an audit team but you never looked at the
planning documentation to understand the business objective or reviewed the
program to ensure you completely understand the section or steps you have
been assigned? I will admit it. I have made that error. Auditors do not want to
ask questions to other team members; there is a fear it will make them look
“not smart.” News-flash – questions are one of the greatest tools for an auditor,
whether the questions are internal to clarify an assignment, task, test step, or
acronym or if it is a targeted question to the business owner. Auditors will not
continue to learn unless they ask questions.
So let me get this straight: You are going to enter a business partner
meeting without clearly understanding the process, testing, or data you are
about to discuss (and question), and you think you will feel confident in that
meeting? You think the business partner is going to believe that the audit
team is there to provide guidance to assist them in doing their job (achieving
the business objective) in the most efficient and effective manner with less
rework? Not a chance. When it comes to the data, the auditor must not only
understand the details of what information is being questioned (even when the
meeting facilitator did not complete the testing in question), but also the source
of where the data originated. Too many times, audit and client meetings get
sidetracked because the auditor could not explain where the data in question
came from.
One of the critical factors when it comes to mastering the data is to ensure
and verify that the data source is pure. The best way to define pure when it
comes to the data source is to validate that the data you have received from the
client and are using in the testing is the complete, best source of data available.
Complete means it contains all of the pertinent fields required to complete the
business task. Also, verify the data is the most current and up to date available
at that time for testing. Once you have confirmed the data source is pure, you
can be confident when discussing the data there is no opportunity for the data
to be discounted. Auditors must be aware that experienced business owners
will respond to issues of potential exceptions or questionable business person-
nel actions by casting doubt on where the auditor got the data (the source). Do
not be blindsided; make sure you have obtained the purest source of data avail-
able. The business owner might try to twist the data itself, but there is no hiding
from data.
Critical Meeting Keys ◾ 9
In every one of the meetings you have with the business owner, prepare
effectively by confirming the meeting objective prior to the event and master-
ing the data. Then remember one additional key to effective meeting facilitation
and relationship building with your business partner: Never try to defend the
questions you are asking. When asking questions or clarifying potential excep-
tions with your business partner, always use the data to support (not defend)
the specific questions being asked. The data will drive the support for your mes-
sage and will always give you the confidence as you seek clarification for ques-
tions posed.
This book has been created based on the Beyond Audit methodology,
which has been developed with communication as the foundation to support
the learning and execution of internal audit activities from risk-based engage-
ments through to the communication of results to business partners and
committees. There are specific excerpts of the Beyond Audit methodology, tech-
niques, and templates mentioned throughout as well as references to access
on-demand videos and interviews (www.beyondaudit.org) illustrating critical
concepts, techniques, and templates. As you proceed through the pages, there
will be discussions of the skills and techniques to ensure the internal audit
team can successfully navigate the ever-changing demands and requirements
of remote auditing. Included in this remote environment lesson will be how the
focused skillset has changed, marketing your revised audit approach, ensuring
your audit team understands the internal audit mission and objective, and
review of the methodology keys from objective identification to execution,
reporting, and action plan adoption. Also, it includes new techniques to not
only evaluate your department’s efficiency but track audit’s progress when it
comes to key deliverables. As always, the book will wrap up with education,
training, and development suggestions so you can create a high-performing,
world-class audit team.
Understanding the Remote
Approach
2
CHAPTER TWO
A
NY TIME YOU A RE assigned an audit, the typical steps kick in as
you prepare and pull together the planning requirements according
to your specific audit methodology. At a minimum, you will establish
the audit in your database, select a team (unless you have been assigned one),
review previous audit work in the area, and begin the planning phase and
all the corresponding requirements. The good news is that all of the standard
audit activities you would perform for any audit will remain the same even
though you will now be performing this audit remotely. So, what is the big
deal? Whether the audit team is executing the audit in the office or within the
business unit (the preferred approach) or doing it remotely, the auditor will
still have to understand the business process, gather intelligence and data, test
the data, and report the results. Simple.
11
12 ◾ Understanding the Remote Approach
While that may sound like the utopia of audit (no direct client interaction and
just review and testing), that is a bad assumption. Take a moment and consider
how challenging it is to get someone from the business team to meet with
you or give you inquiry access to their system; why no one from the business
team has time to take another auditor through the business process; how
long you have to wait for documentation you requested; why no one from the
business team has time to discuss potential findings. Now there are exceptions
where some audit clients are the most accommodating, open, and forthcoming
business partners and will provide the time, data, and information needed
to complete any audit request. But make no mistake about it, those types
of clients are few and far between. Most clients view audits as a disruption
to their day-to-day operations and no business personnel has time to waste
educating the audit team on the business operations that the process owners
believe the audit team should already know. I know it’s an unfair assumption,
but it is real.
To emphasize and illustrate the remote audit approach concept, let’s
discuss how we as traditional auditors can effectively and seamlessly switch
gears and go from the in-person approach to a remote evaluation of critical
business processes. As in every assigned audit, the auditor should begin with
an understanding of the audit objective. Unfortunately, most audit teams get
assigned an audit and never bother to review the annual risk assessment to
determine why this audit was included in the annual plan. The auditors just
figure that the annual planning was completed, and it was decided to include
this audit in the current year. What the auditors do not realize is that the
information compiled in the annual audit plan provides a solid foundation
as to what the business process includes, key personnel, systems utilized in
the business process, as well as any potential process risks. Also included in
the annual planning documentation is the audit history, which details when
the area was last reviewed, what the audit rating (opinion) was, and issues
identified that required management action. Auditors might not recognize
how valuable this information could be, especially when it comes to auditing
remotely. I will admit, not reviewing the annual planning documentation is
probably less impactful when executing a traditional audit but it is significantly
detrimental when performing a remote audit. Why? you may ask.
Compare the two approaches. In the traditional audit, you will get to meet
the key players in person during an opening conference and walkthroughs
and review the previous audit report (hopefully) as you plan. Conversely, in a
remote audit, you will be given the names of the key players, but never meet,
and you will not get to sit face to face with a processor during the walkthroughs
Traditional versus Remote Audit ◾ 13
and have to sort through those details via policies and procedures and follow-up
questions. Definitely not as easy as it may sound. Additionally, by reviewing the
annual planning documentation, the auditor receives valuable background
information on the business process as well as the context in which the review
was completed both from an annual perspective and previous audit. As we
discussed in the previous chapter, you can never prepare enough, and in
a remote audit, you have to prepare and plan twice as hard as before and
be dedicated to the details of your audit methodology. Take my advice on
this point and make your remote audit life much easier: Review the annual
planning documentation, ask questions to the person who completed it, gain
an understand of the business objective(s) and supporting processes, and set
an initial scope based on the objective(s) and previous findings from the last
audit. This first step in preparing for the remote audit will provide a solid
foundation for you to effectively plan and build a test approach to satisfy the
audit objectives and deliver a value-added report to your client.
After the review of the annual planning documentation and the audit team
identification, it is beneficial to have an internal team meeting with all auditors
who will participate on this project. Just like any other meeting, the facilitator
(project lead/in-charge) must adequately prepare for this overview meeting
with their audit team. Topics to be discussed and explained with include, but
are not limited to, the business unit background, business objective(s), pro-
posed initial scope, last audit’s report, rating and issues, any open actions, and
the reminder to be aware of how important communication is during a remote
audit. To clarify these topics, consider business unit background. This infor-
mation should detail the business unit’s location, staff size, turnover statistics,
management tenure, volumes for both transaction and dollar (if applicable),
and current systems used. When it comes to business objective(s), the auditor
has to understand what the purpose of this process under review is. More
simply put, the audit team must understand the role this particular business
process plays in the organization. Consider what product or information does
this group create and is it for internal consumption or is it for the public. If it
is for internal usage, another business unit or team is relying on this team’s
product and decisions will be based on the information provided. And if it is
for public consumption, the risks become even higher if the process is not
completed timely and accurately. Communication, as you will hear throughout
this book, is going to be the cornerstone and foundation for the success of
your audit function, especially while executing remote audits. One of the most
underrated concepts of communication with audit clients is the fact that solid
communication fundamentals start within your own audit team. When the
14 ◾ Understanding the Remote Approach
Every audit you participate on will have challenges, but the remote audit will
exacerbate simple ones into much more difficulties throughout the audit.
Regardless of the audit type, the biggest challenge is availability of the client.
Whether the clients like it or not, they should be a key participant in every
audit due to their knowledge of the process, access and understanding of the
data, system knowledge, and overall process experience.
I think many times auditors take for granted the availability of client access
when executing a traditional audit. That luxury is missing during a remote
audit. I know this may seem like a simple concept, but it plays a huge role when
the auditor is trying to complete the planning process and is missing critical
data or information to close the loop on one particular process piece. Gone
is the time of getting up from your desk and finding someone in the process
area to question regarding the missing information. An auditor’s ability
to follow up, ask qualifying questions, or retrieve missing documentation
becomes much more complicated when they do not have immediate access to
the business team. And there is no telling when and if your business partner
is going to answer the phone to address the next question from their audit
counterpart.
Recognizing the Challenges ◾ 15
as part of the standard policies and procedures. Keep an eye out for these types
of controls and be sure to inquire as to the frequency of their occurrence. This
type of information will provide insight to the day-to-day operations.
As you complete your independent research of the business process and
prepare to set up a meeting (in our remote audit, this will be a call), you must
obtain and verify that you have the appropriate client contact. During the initial
stages of a remote audit, you must ensure you have a client contact person who
can be reached for any process validation, system access, sample selection, and
data and documentation questions. Having an established client contact from
audit kickoff will expedite the critical step of information sharing throughout
the audit. Be aware and quickly raise the question within your own audit team if
you have been assigned a business partner contact who does not have the time,
information, or detailed knowledge to effectively and efficiently address specific
audit questions. Without an effective business contact, the remote audit will
stall on a regular basis. Keep your ears focused on identifying traits of a business
contact who is not ready for primetime during your audit.
If your contact is not reachable during normal business hours, is not able
to answer process questions without having to validate the information before
providing a response, and is consistently missing established deadlines for pro-
viding requested data, system access, or samples, you need to discuss the sit-
uation with your audit team and determine the root cause. Unfortunately, in
these scenarios, it could be the result of a lack of experience or process knowl-
edge or it could be because the business contact was instructed to review all
requests and questions with a third party in the business unit to ensure only
certain details and data are provided to the audit team. While it is usually a lack
of experience or knowledge causing the delays in responding, there have been
numerous instances where data and information was being scrubbed before
giving it to the audit team. In the end, if your audit planning approach is com-
plete and follows the Objective, Risk, Control process approach to be detailed
in Chapter 5, ultimately the data and corresponding testing will validate the
control environment and corresponding effectiveness. The only result of delay-
ing the delivery of information to the audit team is expanding the length of
the audit. So, when possible, be sure and verify you have a competent, knowl-
edgeable business contact for your remote audit. You can accomplish this by
building a rapport with the business contact during your relationship develop-
ment by asking for their background and tenure in the department. This type of
basic business experience knowledge usually provides a good indication of how
smoothly information will be exchanged throughout the audit.
18 ◾ Understanding the Remote Approach
RESPONSIBILITY ASSIGNMENTS
Another factor that will contribute to the success of your remote audit will be
the assignment of work to be completed in each audit phase. This responsibil-
ity is no different in a regular audit, as compared to a remote audit. However,
the person responsible for keeping the audit on track should have a height-
ened awareness of the assigned task, along with the corresponding deadlines
for each, as the tasks can get out of control from a delivery standpoint much
easier on a remote audit. This is due to the fact that the audit team is usu-
ally physically dispersed during the remote audit and task delinquencies can
go unnoticed sometimes until it is too late.
To ensure remote assigned tasks keep to their assigned deadlines, the
project lead or in-charge has to remain diligent in the tracking and monitoring
of the business unit questions, data requests, and audit testing completion.
Any delays, missed deadlines, or audit work challenges must be identified
proactively and addressed with expediency. Too many times, the audit suffers
from a lack of oversight on remote audits because there is a lack of regular
and timely communication within the audit team. As previously discussed,
remember how critically important it is for the audit team to maintain a high
level of communication within the department and during audits to ensure
all team members are aware of the deadlines and the urgency to complete
assigned tasks on budget.
One caveat must be mentioned when it pertains to assigned budgets. A
budget is the documented estimate of time to complete a task, and it is based
on either historical data or a projection that was formulated from the testing
requirements to be completed. Keep in mind that budget estimates are just a
best guess. Although they should be regarded as a guide for how long any audit
task or testing should take to complete, budgets can and should be challenged
when they appear to be unrealistic. Do not ever rush or force the assigned work
just to fit into the budget number. That is a huge mistake. The moment you iden-
tify that there is no possible chance that you or any auditor could complete an
assigned task under that corresponding budget, say something. Do not try to
go faster to make the deadline just for the sake of the deadline. When that hap-
pens, whatever work or testing was supposed to be completed will get finished
within the budget but will ultimately have exclusions and mistakes, along with
a false sense of accomplishment.
One additional tip related to budgets: The moment you are certain there
is not sufficient time to adequately complete the assigned task within the
Communicating Critical Information ◾ 19
budget, reach out to your audit project lead and explain the need for additional
time. Make sure you detail the initial budget, data and work required, and
the time needed to review and conclude on the data. This will ensure you
have considered all aspects of the task and sufficiently supported the need
for additional time to complete the work adequately and accurately. In the
remote audit environment, the budgets tend to be more aggressive because
audit teams believe execution of the planning and fieldwork phase do not
need any buffer time built into the assignments because there is no time for
chatting about the work or relationship building. It is all about just getting
the information and data and doing the work. In actuality, the inverse is true.
In a remote audit, it takes more time for auditors to understand the process
requirements and data being provided, so more time needs to be allowed for the
audit team to ask qualifying questions to ensure the auditors fully understand
the process before attempting to evaluate for the planning phase or reperform
the process during fieldwork. So, before you begin a task or audit testing,
make sure you review the work being assigned, along with the corresponding
budget, and determine if the initial budget number matches the work assigned.
Auditors should always closely monitor their own work and ensure they are
delivering a complete quality product while communicating with the audit
project lead on any work challenges and potential deadline extensions. This
will assist the project lead in ensuring the business client during this remote
audit is up to date on the status of the audit work being completed in their
business area.
In an effort to keep your business partner “in the know” during this remote
audit, it is paramount to establish regular, formal status meetings through-
out the audit. The frequency of these status meetings is usually established in
the introduction or kickoff meeting. When I am leading an audit (especially
a remote one), I will suggest to my business partner that we should have a
weekly status meeting to ensure communication channels between the two
teams remain open, clear, and strong. Along with my weekly status meeting
request, I provide the need and benefits of the timing. When it comes to the
need, auditors have to realize that in any audit, getting the information to do the
job requires many requests (usually more than one per need) for information,
data, and explanation. To fulfill that need, we can establish a weekly meeting
to discuss the status of the audit as well as outstanding requests to date. This
20 ◾ Understanding the Remote Approach
AUDIT PLANNING
So, let’s first start with the audit plan. You have been given an audit and begin
to compile critical business process–level information related to a particular
business unit, which you may or may not have encountered before. Addition-
ally, it may be the first time the audit department has audited this particular
area, so there are no previous audit reports or documentation to provide any
background on your new assignment.
How do auditors approach such a task when they are beginning at ground
zero when it comes to information on this unknown business function? Most
auditors will do the obvious and go straight to the internet and research this
particular topic to see what most common information about this process is
available. They may go to their favorite audit-related internet site to try and
obtain more information or possibly “canned” audit programs related to their
assignment.
Keep in mind that after your online research efforts are complete, the
information you have obtained is only a general overview and does not in any
Audit Planning ◾ 23
way, shape, or form represent the business processes within your company.
Every company and its corresponding business support processes have specific
requirements that are unique to their way of doing business. And those unique
business characteristics can only be learned from the business personnel and
not the internet. Thus, there is a mandatory need to establish a good working
relationship with the business partner to gain a baseline understanding of the
function. If this truly is a business function the audit department has never
reviewed, it is going to be critical for the lead auditor to ensure they explain
to their business contact the audit department objectives and how an audit
works. Again, while this may seem like an easy task, the audit leadership team
must ensure all auditors have the same knowledge of the audit function and
deliver a consistent message to audit clients regarding audit’s mission and the
required steps necessary to complete an audit. This will guarantee that all
audit clients are receiving the same message regarding the audit process and
the need for business partner involvement throughout the audit to ensure its
success.
While auditors need to acquire business process knowledge during the
planning phase, they must recognize completing the task does not mean
acquiring the same knowledge as the business processing personnel. Too many
times, auditors in the planning phase exhaust the full planning budget diving
too deep into the intimate details of a business process. Getting “buried in the
weeds,” for a lack of a better phrase, usually means the audit team has gone
too far into the business process minutia, which, in the end, will not increase
the value of audit testing or the final report. During the planning phase, it is
important to remain focused on the key business processes, which drive the
achievement of the business deliverables (objectives). This is accomplished by
reviewing the business developed policies and procedures, available flowcharts,
and process walkthroughs with business personnel. The auditor should use
every meeting and interaction with business team members to strengthen
and foster the audit and business partner relationship. Auditors should spend
more time with their business partners explaining the learning approach
an audit requires and the corresponding reasons why it is so important. Let
your business partners know how important the information sharing (and
learning) is to an auditor during the planning phase as it sets the direction
and focus of the upcoming audit. Additionally, all knowledge gained will
be used in the development of the audit testing. With the proper business
knowledge sharing, the audit planning documentation can be executed with
minimal issues, questions, and business personnel disruption. Sufficiently
detailed planning documentation will provide a solid foundation for the audit
24 ◾ Understanding the Remote Approach
AUDIT FIELDWORK
After the planning phase comes the audit fieldwork. During this phase, the
auditors must continue to work the audit and business partner relationship
each time client documentation or data is requested, clarification of a business
process step is required, or validation of a potential deviation from the business
processing standard is noted. In each one of the previously listed incidences,
the auditor is going to be required to communicate directly with the client to
obtain the information or gain an explanation of an unknown. This creates
the perfect opportunity for the auditor to build additional rapport with the
business partner in an effort to gain trust to strengthen the bond between
the two. Think about not only how critical these interactions are with the
client but also how difficult these can be to execute when it is being done
remotely. Being in audit over 30 years, I can attest to how challenging the
fieldwork phase is, especially when additional information, data, or detailed
explanations are needed to complete a test. Now complicate that need with
the facts of the client not being readily accessible or the questions requiring
answers are difficult. That is what remote auditors are facing on a daily basis.
Audit Reporting ◾ 25
During these remote audits, auditors may not know if a client is available for
questions or willing to answer the phone when it rings. And if the client does
answer, will the client have the time to discuss and explain the challenges the
auditor is facing, or will a new meeting have to be scheduled to address the
issues? Everyone in business knows how difficult it is to schedule business
meetings with representatives from multiple units. While this type of situation
will not stop the audit from progressing, it will impact the timing of the audit
testing and will result in the auditors having to reacquaint themselves with
the test requirements. All of these situations affect the timing of the targeted
audit completion.
Also, remember to prepare for this impromptu follow-up meeting with the
client, as the auditors must be ready with the exact topics, questions, and data
which are to be discussed in this call. If the auditor is not adequately prepared
for this call, I can guarantee you three things:
All three of these outcomes damage the audit and business partner
relationship, and in established relationships create unnecessary erosion. It
may not seem like a significant issue at the time, but the repeated calls or
interruptions due to a lack of preparation on the auditor’s part will create stress
on the relationship, which impacts the audit team’s ability to access critical
information to complete the audit in a timely manner (close to the allotted
budget) and establish a productive communication channel to facilitate issue
validation, root cause, recommendations, and action plan discussion needed
to deliver a value in the final audit report.
AUDIT REPORTING
The relationship building in the audit report phase could be considered the pin-
nacle of the audit and business partner relationship due to the impact of the
interaction between the two groups during this final phase of the audit. Think
about how much back-and-forth there can be when the draft report is being
created. The audit status memo that was mentioned previously in this chapter,
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Hän pisti kynän käteeni. Minä istuuduin ja aioin juuri piirtää nimeni,
kun samassa satuin nostamaan silmäni ja huomasin vastapäätä
istuvan neitosen iskevän viekkaasti silmää tirehtöörille. Synkkä
aavistus tuli mieleeni. Nousin ja hellitin kynästä sanoen:
"Pankissa."
Mutta niin pian kuin nuori tyttö jää yhden miehen saaliiksi, on hän
mennyttä kalua. Sirkka vetäytyi yksinäisyyteen, vaipui haaveiluihin ja
itki ilman syytä. Luulimme häntä sairaaksi, mutta hän antoi
kierteleviä vastauksia ja koetti välttää keskustelua.
Katri nauroi:
"On siinä ero kuin yöllä ja päivällä. Jos mies rakastuu, hoitaa hän
siitä huolimatta tehtävänsä, mutta nainen kulkee ja uneksii
rakastetustaan, unohtaen koko maailman. Korkeintaan hän sepustaa
rakkauskirjeitä."
Huomasin Katrin alahuulesta, että hän piti tätä väitettä hirveänä
loukkauksena koko naissukua kohtaan. Ajattelin jo hiukan lieventää
sitä myöntämällä, että rakastunut nainen joskus lisäksi neuloo
kirjoitusmaton tai palttoon nimikirjaimet sulhaselleen.
"Miellyttääkö sinua?"
"Isännöitsijäkö?"
*****
Kesä meni kuin siivillä. Syyskuun ensi päiväksi piti Sirkan saapua
kaupunkiin alottamaan viimeistä kouluvuottansa. Hän oli maalla
voimistunut, tullut päivänpaahtamaksi ja vereväksi. Soitellut hän oli,
ei sentään läheskään niin paljoa kuin minä olisin tahtonut. Enimmän
aikansa hän käytti rakkausromaanien lukemiseen ja haaveiluun —
siltä ainakin minusta näytti. Vähintään pari kertaa viikossa hän
kirjoitti rakastetulleen Helsinkiin, ja ellei ensi postissa tullut
vastausta, kävi hän hermostuneeksi ja arveli jonkun onnettomuuden
tapahtuneen. Tyttö-hupakko oli pihkaantunut nenännipukkaa
myöten!
Setä oli huonolla tuulella, sadatteli ja noitui syksyä, joka oli niin
turmiollinen luuvaloisille. Kuuntelin kärsivällisesti valitusvirren
loppuun — muutoin ei olisi maksanut vaivaa edes puhua
rahapulastaan. Katsoinpa eduksi asialle muutamin valituin sanoin
huomauttaa, että setä oli viime aikoina tullut nuoremmaksi ja
terveemmän näköiseksi, niin etten ihmettelisi, vaikka joku nuori
neitonen vielä rakastuisi häneen.
"Vai että jo ollaan niin pitkällä! No, minkä niminen on yhtiö ja missä
talo sijaitsee?"
"Suuriko on osakepääoma?"
*****
"Minulla on asianajotoimisto."
"Pian on eduskuntavaalit."
"Me…? Te ja minä…?"
Tämän sanottuani osoitin hänelle sitä paikkaa, mistä tie kulki ulos.
Hän laski käden mahtipontisesti sydämelleen ja lausui kuin paras
näyttelijä: