6 better questions to ask audit clients
Early in my career, I had an audit client teach me a valuable lesson. He taught me (1) there is power in the questions we ask (2) not all clients are forth coming with information and (3) as auditors we need to learn to ask better questions. We were interviewing the client as part of our preliminary planning. The more senior auditors on the engagement directed the questioning. Of course they asked the most popular and probably the least useful question that many auditors ask…What keeps you up at night? The client responded, “Nothing, I sleep very well”. While this was not the ideal answer, it made me question how we “question”. I understand the intent of the “what keeps you up” question. We really want to attempt to understand if our clients have any concerns. But let’s face it, we are auditors. Many clients are not 100% forthcoming. I believe that there are 6 better questions that we can ask using a flexible yet methodical approach in order to gain an understanding of and evaluate operations.
What are the goals and objectives?
This question helps us to determine what the function or process is trying to accomplish. It is absolutely impossible to evaluate a process without first understanding its purpose.
Who sets the goals and objectives?
It is important to know who the captain of the ship is. This is the person or group you will need to consult to (1) gain clarity on expectations and/or (2) discuss gaps in expectations and actual performance.
What are the processes designed to achieve goals and objectives?
The answer to this question will vary depending on your audience. For example, a unit VP may provide the high level layout of his/her span of control noting key personnel. A department manager, on the other hand, might provide a detailed walkthrough of operations. Regardless, it is important to understand the processes and how they relate to the overall goals and objectives.
How will you know if you met (or missed) goals and objectives?
This question helps auditors understand the oversight and monitoring for the processes in question. Ideally, there should be some oversight locally that flows upstream to managers, Vice Presidents, the President, and ultimately the Board.
What 3 items if not performed result in total process failure?
Okay, so this is what should be keeping clients up at night. The point here is to determine the critical elements within the process. We want to make sure the controls surrounding these items are effective.
Have there been any recent process failures. If so, how were they detected and corrected?
Okay, I know technical there are two questions here. We should be concerned about recent process failures. The goal here is twofold: (1) we must understand that we are most likely dealing with a new process and therefore our testing must reflect this and (2) it gives us some insight has to managements style when addressing issues (i.e. are problems swept under the rug, aggressively fixed, or patched clumsily).
Now we should have a full understanding of function under review including:
- Goals and objectives
- Methods to achieve goals
- Responsible parties
- Significant processes
- Recent control breakdowns
At this point, let’s ask our audit client, “What concerns do you have about the goals, processes, and oversight within this function”. It may not keep them up at night, but rather haunt them during the day.