No, it isn’t that purpose of the audits, internal or external, that these invaluable interventions are prized for or sought after. It’s the purpose, that inept and incompetent audit clients cannot grasp. The two might be related but are definitely distinct.
They’re related because the core purpose is overarching, and the other purpose is at the transactional level. It’s not that the overarching purpose is well understood, and the other one isn’t. The overarching purpose is also understood in theory only, not in practice, because that understanding isn’t practiced.
The overarching purpose of internal audit is value addition and improvement in organization’s operations through objective and independent assurance and advisory interventions. The purpose of external audit is to ascertain the truthfulness and fairness of financial information about the affairs of the entity.
There’s nothing in the purposes to offend anyone and especially the clients. On paper, they are all good, especially the external audit one with so little verbosity than the internal audit one (although the length of the external audit report nowadays tells an entirely different story thanks to the revised ISAs).
In fact, the external audit also always fares well with its theoretical purpose and marginally well with the perception of its purpose too. That’s because of its standard financial information based specific scope, its coordination largely with the accountants at the client’s end and its statutory status for most clients.
But it’s not that internal audit doesn’t fare well in this regard alone, unfortunately, internal audit being ‘internal’ to an entity, has to face a lot to be desired from questioning its scope, purpose, objectives, approach to budget rationing to finally belittling its findings.
However, this is not what’s the intent of this blogpost is. The internal as well as the external audit don’t exactly enjoy a sound understanding of the purpose of their work, their approach, their game plan and it all ends up questioning their purpose aka intentions especially when soliciting information!
Let’s first try to unravel why clients question audit purpose before putting it to rest perfectly:
- There’s no understanding of the auditor’s approach.
- There’s no understanding or a very crude understanding of the audit engagement’s objectives.
- The auditor’s approach is meant to be standard.
- The auditor needs to stick to the engagement objectives.
- The relationship between audit engagement objectives and an auditor’s approach should be linear.
- The auditor ought to limit the audit approach to engagement objectives.
- The auditor ought to have an approach that’s understandable or in fact endorsed by client.
- The auditor should clearly communicate everything intended to be done while completing the engagement.
- The client has something that should be kept hidden from auditors.
- The client is incompetent or at least incompetent enough to grasp the audit approach!
- The client is unprofessional and cannot comprehend how audit engagements are professionally executed.
And the most practical manifestation of this regressive, yet general conduct towards auditors is when clients feel tempted to block auditor’s access to evidence, unless the auditor’s intentions are revealed! It’s like clients have a firm belief that auditors have something up their sleeves every time they are on to an audit engagement.
Let’s now put these potential reasons to where these belong:
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Client Approach |
Professional Auditor’s Approach |
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No understanding or crude understanding of the auditor’s approach and audit engagement objectives |
Clients are not expected to be fully cognizant of the auditor’s approach and audit engagement objectives Auditors are not required to make their clients understand their approach and their engagement objectives Its client’s problem if they exhibit a lack of understanding, not auditors’! |
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Auditor’s approach is meant to be standard |
There’s no such thing as an auditor’s standard approach! Audit approach is driven by nature of engagement, driven by engagement objectives, guided by quest for improvement and enhancement in value delivery. Standards (ISAs and GIAS) spell out the minimal requirements for professional audit services. Their intent is to tap the auditor’s imagination and creativity, not cap it. |
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Auditor needs to stick to the engagement objectives |
The auditor has a better understanding of the audit engagement objectives, not the client! It is for the auditor to translate the objectives into the audit approach, not the client! The engagement objectives are meant to be evolving, not static! |
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The relationship between audit engagement objectives and audit approach should be linear |
Engagement objectives are the minimal set of overall objectives an engagement is expected to fulfill and are linked with the strategy and nature of service. Auditor’s approach on the other hand is the operational strategy, which the auditor develops and pursues during the course of the engagement. It’s the auditors’ task to determine the sort of relationship that applies not just between the engagement objectives and audit approach but between all the client’s records, data, information and audit evidences, the auditor can have! Furthermore, neither the engagement objectives nor the audit approach is or can remain static. |
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The audit approach ought to be limited to the pursuit of engagement objectives |
It’s for the auditor, not the client to identify, assess and put a bar on the audit approach. It is also for the auditor to identify, assess and decide how far and wide the pursuit of objectives could stretch the audit approach! |
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The audit approach should be understandable or in fact endorsed by the client |
A concern for internal audits only since external auditors do not need endorsement for their fixed scope audit engagements. Whilst planned internal audit engagements might reflect the wishes of the management; their conduct and the audit approach are the auditor’s prerogative. The only endorsement internal auditors need on their audit approach is value delivery! |
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Communication of everything entailed as part of the audit approach to client |
The only communication clients should expect from their professional auditors is for requiring and providing information, draft and final audit reports. |
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Stuff that needs to be hidden from auditors |
Competent professional auditors unravel everything! |
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Incompetence and lack of professionalism at client end |
Not a cause for concern for the auditors! |
In order to add value, the first thing auditors need to be concerned about are the professional standards that govern or guide the organization of audit function and audit activities. The only other thing auditors need to ensure is that they are unrestrained in their judgment and imagination.
And the only thing clients need to comprehend is that auditors are always ensured (by virtue of standards and even statute) unrestricted access to data / records / information of their choice to be used for review and audit evidence. Even questioning auditor’s purpose behind seeking any piece of information is akin to undermining auditor’s independence.
No matter how divergent or irrelevant a professional auditor’s official information requisition might seem to the client, the only thing clients can do in their own best interests is to comply and that’s what I call the Law of Audit Evidence!
Consequently, professional auditors make sure they’ve the best interests of the clients they serve in mind!
It’s obvious that the auditors we covered in this blogpost are the ones who have a mind of their own. They are the ones who always have a way to offer and add value greater than thought and identify or bring out advisory beyond the obvious.
They are the ones who definitely have something up their sleeves each time they’re in the field; how to be more useful than thought!
It wasn’t about those unambitious and docile auditors who are simply content with whatever task they’re assigned with in whatever capacity and arrangement it could be, and they just stick to the script. Because I call them management sidekicks, not auditors!