August 13, 2019

Back to School – What Grade Do You Give Your Auditors?

Back to School – What Grade Do You Give Your Auditors?

It’s August, time to buy back-to-school outfits for the kids and ease them into waking up before 10:00 am.  It’s time for studying, homework, tests and grading. But kids shouldn’t have all the fun… bring some of that back-to-school energy to the office. What if you grade your auditors? OK, I am just semi-joking.

I don’t suggest actually grading them, but what about a refresher course? For example, do you know the answers to the following questions?

  1. Are your auditors critically thinking about each test step to determine if they are meeting the control objective?
  2. Is the documentation sufficient so that anyone who reads their work gets to the same conclusion without follow-up questions?
  3. Are they reverting to SALY (Same As Last Year) and not considering the best way to test and document?
  4. Are the reviewers really digging into the details, or are they glossing over the documentation and missing key follow-up questions?
  5. Have all your auditors received proper training, or do they learn as they go?
  6. If your department’s documentation were stronger, would external auditors rely more on their work and ultimately reduce audit fees?

Benefits of Engaging an Outside Consultant

When you partner with an outside consultant to assess your department’s documentation, you receive an unbiased analysis of the quality of the documentation. An outside consultant provides you with a fresh set of eyes and can help determine if new approaches should be considered. Also, many auditors assume the person reviewing the documentation knows certain details about the company, but the documentation needs to stand on its own so that any new auditor, member of management, etc., can quickly understand how conclusions were reached.

No one wants to receive review comments—it means that the reviewer found areas for improvement, and now the auditor has to go back to redo their work. However, the goal is to learn from review comments and apply them to future audits. In other words, review comments make them better auditors! As they learn, the number of review comments will decrease. Their documentation will be able to stand on its own and mitigate the need for follow-up questions. Your audit department can benefit by having an outside consultant review work papers to provide a quality check-up, and provide a refresher course on best practice audit techniques.

There are two ways for the review to happen:

  1. The outside consultant can review the auditor’s work and bypass the typical reviewer’s job. This frees up the reviewer’s time and can be very beneficial when your department is busy.
  2. The outside consultant can review work that has already been reviewed. This is effective because the auditor learns what they should have documented differently, and the reviewer learns what they should have caught.

How big of a project is this?

The scope of this type of engagement is completely flexible. The outside consultant can review just a few tests from each person or a selected group of people; or they can review full audits.

What do you get out of this exercise?

  1. Detailed review comments by audit step.
  2. Overall audit documentation improvements in the form of a checklist. Each auditor and reviewer can refer to the checklist to ensure their documentation is sufficient before it is ready for review and to improve the quality of review.
  3. Instructions on how to craft better recommendations for the organization based on audit findings.
  4. Training for your audit staff so they understand why the review comments were given and the purpose of them.

So as we all get in that back-to-school mentality, think about how your team can learn best practices. “Testing” your auditors is a great way to see where there is room for improvement. When your auditors put in the effort to make those improvements, your department and organization will reap the benefits.

Do you have questions about internal controls for your audit processes? Marcum’s Internal Control consultants specialize in helping our clients improve their audit processes. Please contact your Marcum representative to discuss how we can help your department.