And dear audit clients, please don’t pretend to be what you aren’t. Embracing what you aren’t is the first step in improving yourself. And it doesn’t matter if it’s your auditors who are trying to convince you to be a better version of yourself or simply telling you that you aren’t what you claim to be. There’s no harm in conceding that you aren’t what you perceive to be to your auditors!
And isn’t that’s why we perform gap analysis? A current state assessment to compare with a desired state, a state we want to see ourselves at? So, what’s wrong in embracing:
- Your deficiencies
- Your flaws
- Your errors
- Your incompetence
- Your inabilities
- Your nonaccomplishments
- Your suboptimal performance
- Your failures
Oh, I get it, the ego! But is ego worth more than the fact that you need to learn and improve? Is ego so important that remaining in a state of self-denial is better? Does ego have to be prioritized over enhancing your real worth and value?
Certainly not! But yet in my experience I’ve seen qualified professionals satisfying their egos in the face of well-meaning criticism from equally qualified professional auditors. Maybe that’s simply because there’s a stereotypical response to everything audit. Or maybe because embracing weaknesses identified by auditors is the worst spot to be in!
Maybe that’s also because auditors are considered to be underdogs. The reasons for this assessment could be numerous, from perceiving audit to being nuisance to how business is being run to the understanding that auditors always begin learning from clients and then come after them or to keep the audit function resource starved. However, this is not what this blogpost is about!
Underdogs or not, this isn’t about the auditors, but about the clients of the auditors. Why clients have to be dismissive of their auditors is nothing new. Why clients cannot assimilate and absorb professional critique of their conduct from auditors is something that needs to be discussed, evaluated and changed. Because demand for improvement and professionalism is not a one-way road!
One cannot demand competence, ability, improvement, evolution and professionalism from auditors when you cannot practice these traits yourself. Afterall, clients need to be aware of and understand what is it that they expect from their auditors. If they don’t understand these traits, they cannot identify these in their auditors too!
And this brings us to another particularly important point, meritocracy at the client’s end, so that traits such as competence, ability, improvement, evolution and professionalism could not just be touted, but experienced and thus vouched for by auditors.
Unfortunately, in my experience the demands on meritocracy and the best possible talent have been stronger on the auditors rather than the clients. Since budgets at client’s side have always been generous, (the revenue vs cost center perception) skills deficient in one resource are made good by others, it had never been the case with auditors. So, for the audit side, clients have always been on the lookout for recruiting smart talent rather than the numbers.
Though this works only if the client is at least smart enough to distinguish a smart auditor! Otherwise, we do continue to have auditors performing pre-audits. Yes, it’s not because that’s what those auditors do. It’s because the clients wanted them to do so! If you read between the lines here, that’s yet another proof of lack of meritocracy at client’s end, making auditors part of operations to cover their own deficiencies.
But even where auditors could find suitably qualified professionals at client end, the approach towards audit is not professional. Increasingly auditors are asked and taught to also report positives that they have encountered during an audit engagement. Is the same being asked of the clients? Certainly not.
Instead, the regulations and statutes have been so wanting in this regard that all they do is ensure that auditors are given resources and access to records, review the scope and extent of their services and consideration of reports. Isn’t that what should always have been given when investing in any audit service? Isn’t this the bare minimum one would expect?
- Where’s the requirement for how clients should be conducting themselves when responding to audit queries and reports?
- Where are the requirements regarding the client’s approach towards audit findings?
- Where are the special protocols that clients need to follow if auditors have unearthed findings of a significant nature and / or exposure?
- What are the safeguards clients required to ensure the auditors with when the auditors have uncovered frauds?
- Most importantly, should auditors be confronted with the findings they’ve reported, or should these be encouraged and discussed to understand where improvements could be made, even if at auditors’ end?
Fortunately, and unfortunately, the external audit has always been better placed and respected than the internal audit. This is because their reporting (on historical financial information!) impacts investor markets. So, it has always been in the best interests of the clients to have their relationships with external auditors’ cordial. But for internal auditors, clients somehow like to keep matters internal’, not subject to evaluation and improvement!
Even if the clients find themselves being confronted by a professional but a ‘rogue’ (read unrelenting) auditor, the clients do manage to find a way to ‘discipline’ them. The client management’s close working relationship and the auditors’ not so close working relationship with the Board comes in handy in such times of despair! Afterall, its managements that run (or ruin) businesses, not auditors!
Then there are other excuses clients regularly exercise for their belittling behavior towards their auditors:
- Auditors don’t have a sound understanding of the processes as well as the process owners do.
- Auditors don’t have operational responsibility for tasks, so they can’t be right about why clients do or not do something in a particular way.
- Auditors can be asked to let go of their stance / findings for the sake of ‘better working relationship’.
So on and so forth.
And there’s one thing that auditors do that also causes clients to have a non-serious approach towards them, jumping positions from audit to management! To me in internal auditing at least and for sure, it’s a curse! Since such former auditors practically undo all the works they did while being the auditors when they become part of their client managements!
But what if the client managements decide not to pay heed to any sane advice from auditors? Surely, it becomes hard if the managements decide they don’t need to take stock of their deficiencies or improve. Well, even in that case, there’s still some fight left, be it with shareholders, regulators, equity markets, courtrooms, newspapers and finally the history archives! Because that’s where it all could end.
It’s just that auditors don’t like to go there, because they want to keep it professional, even if the client’s management isn’t willing!
There has always been a lot of schooling on how auditors should conduct themselves and be groomed to be professional in their approach and where the audit focus should be. I think if the clients have their focus right on doing things the way these should be done, auditors won’t even be a distraction!
If clients insist upon playing the retrograde, remember the auditor’s conventional reputation had been regressive; being people always on the lookout for findings.
Let’s then shift down to de-evolution! And well, don’t think professional auditors are going anywhere, we love to die fighting, so brace for impact!
P.S. The blogpost refers to all auditors but especially the ones adding value…. the internal auditors!