It’s not as simple as the words suggest it to mean and certainly it has something for both the auditor and the auditee. But self-auditing has strings attached to it that extend well beyond auditing yourself (auditors and auditee), in terms of its implications.
In the pursuit of perfection, self-auditing is excellence, always being in the mission to be your better self professionally. Perfection could be subjective since there isn’t a standard to conform and because achieving perfection negates efforts to improve further. Excellence, however, is agreeable and attainable with an approach replete with an auditing of its kind, self-auditing!
Self-auditing is not simply an approach. It’s a concept, an idea that’s as much practical as it is academic. Let’s delve into the concept and all the goodness it offers.
Self-Assessment
At its heart, self-auditing begins with self-assessment. A psychological approach to understand one’s own self, self-assessment is about reflecting upon one’s strengths, weaknesses, accomplishments, goals, etc. Perceived to be subjective, self-assessment aims to identify what’s important so that it could be emphasized upon, moving forward.
There are several professional applications of self-assessment, the most relevant for us being the controls self-assessment (CSA). Undertaken by an entity’s management, it is a structured approach that aims to ascertain the state of internal controls in terms of mitigation of risks to the accomplishment of objectives. Having been in practice for a few decades, CSA continues to add value if undertaken in a disciplined manner.
Another hard-core application of self-assessment with which most of us are familiar both personally and professionally is taxation. This self-assessment too is structured as we’re guided through to determine our inflows and outflows, assets and liabilities to ascertain our tax liability.
Both the applications are based on the premise that we can make a fair assessment of our own situation and finances and that both come with a caveat; an audit is possible if so desired!
Self-Evaluation
Self-Evaluation is an advanced form of self-assessment. It is used in the context of objectives accomplishment. It starts off from where self-assessment concludes and thus might include the gains from self-assessment. Since it’s an evaluation, it is designed in a manner to be as objective as possible through use of a criteria.
Self-evaluation has a wide range of applications, in fact so wide that we do not usually know when and how we’re using it. The most significant application is in the form of measurement and monitoring / detective controls that ensure the processes they’re part of are performing as intended and that non-conforming transactions are being flagged as exceptions for review. These self-evaluating controls ensure conformance with the objectives of the process design.
Another major application of Self-Evaluation comes from the push towards standardization to ISO established benchmarks. ISO through its most widely adopted standards of 9001 (Quality Management Systems), 14001 (Environmental Management Systems), 45001 (Occupational Health & Safety Management) and others necessitates that entities adopting and conforming to the requirements of these standards inculcate formal mechanisms of their specific management systems evaluation.
Yet another most major application of self-evaluation is in performance management systems. Entities who have formal systems to measure employee performance against assigned targets make self-evaluations of their employees’ performance against the target’s fulfillment criteria.
All the significant applications of self-evaluation mentioned above have one thing in common, the formality of their design which aims to make them most objective platforms of measurement, be it processes, systems or performance. But since these are performed by differing hierarchical levels of an entity’s management, are they independent enough to be really called objective? I leave that to your judgment and after reading what follows you will be able to decide yourself!
Self-Auditing
The most advanced form of self-assessment is self-auditing. It’s a concept that unfortunately doesn’t have the traction it deserves. But that’s because it isn’t well understood beyond auditing yourself. Put simply, it is both the self-assessment, self-evaluation and independence combined. Let’s try to decipher the concept here.
First is to understand that auditing always means a transparent, formal, organized and independent intervention for improvement. It means that it has the virtues of both self-assessment and self-evaluation coupled with an added most desirable feature of systems / processes / controls / organizational independence. Don’t take my words for it, take any definition of auditing, be it external or internal.
A point to ponder here. If an audit team lacks the features in italics above, their interventions could be anything but auditing!
It’s a concept that aims to inspire in us the urge to make an independent review of our work and our approach to work, free from our own biases. Here’s how that’s done in a staged manner:
- By reviewing our historical work afresh
- By reviewing the work of our peers
- By reviewing the work against established standards and approaches
- By getting our work peer-reviewed
- By identifying, accepting, owning and being accountable for deficiencies in our work
- By being open to the possibility that there could always be a better alternate to the way we do our work
- By constantly challenging ourselves on different and improved approaches to the work we do
Finally, an approach to self-audit is hardwired in ourselves.
In an overall entity’s perspective, the most significant application of self-auditing is the entity’s investment in Internal Audit. Internal Auditing conducts an objective and independent assessment and evaluation of Governance, Risk Management and Control Systems. Entities looking to inculcate self-auditing within their teams need to look no further for inspiration than their internal audit teams.
The recommendations from auditors are issued and sold with an aim to simplify the auditee’s work and approach. As a result, the benefits certainly accrue to the auditor. Self-auditing aims to do it conversely. It inspires the auditees to review and improve their work and approach to match that of an auditor’s thus aiming for ease and productivity of audit work and consequently benefiting themselves from such an approach.
Apart from these the most significant virtues of Self-Auditing include:
- Continual improvement; a cyclical constant quest for improvement
- Sustainability of systems, processes and operations owing to constant review and improvements
- Market Leadership, staying ahead of the curve owing to culture of improvement and fostering sustainability.
As for us, the Internal Auditors, self-auditing by auditees is a concept that won’t impact entities investment in what we have to offer, except in a positive way only. Together the internal auditor and auditee can be a partner in aiming for perfection and achieving excellence!
It’s also because the single most excellent manifestation of self-auditing is within Internal Auditing. The Global Internal Audit Standard (part of the IIA’s GIAS) 12.1 and 12.2 make it incumbent internal auditors to make formal, organized, frequent and documented mechanisms for self-assessment and self-evaluation of the performance of Internal Audit Function. This is then required to be monitored by the Board.
Its pure joy for us, the internal auditors to understand that self-auditing is in fact selfless auditing and for auditees to believe that Internal Auditing champions it!