Internal Audit: Working Smarter, Not Harder

The saying that “perfect is the enemy of the good” seems to apply especially to internal auditing. Some of the most common mistakes by new internal auditors are made simply because we want our work to be, well, perfect. That’s an admirable goal, but perfection can take time — and time is the enemy of audit efficiency.

One of the hardest lessons I learned as a young auditor was to resist the temptation to over-audit. We all want to produce the best, so when we develop an audit program, it’s only natural to try squeezing just one more thing into the schedule. But each time we increase a sample size or add a step to a work program, we not only have to perform the additional work, we’ll also need to discuss it with the client. More time might be needed to review the work or write the report. Before long, “audit creep” sets in and our schedule becomes exhausting.

High-impact internal auditing means focusing on those activities that will be the most meaningful. When we add steps that extend an audit past its planned completion date, we may end up delaying or even cancelling higher-priority projects. Over-scheduling can decrease an audit’s effectiveness or even lead to failure to complete annual audit plans. Customer satisfaction also declines when fieldwork is extended or when reports are delayed, especially when the delays are caused by over-audit of relatively low-priority issues.

Over-auditing is not the only area where “perfect can be the enemy of the good” in internal auditing. Attempts to create “perfect” file documentation (if, indeed, there is such a thing) can add days or weeks to an audit schedule.

Those of you who have read my book, Lessons Learned on the Audit Trail, know that shortly after I began ​my first job as a CAE, I noticed that internal audits in my department were taking an unusually long time to complete. A closer look revealed that the internal auditors were spending an inordinate amount of time preparing workpapers. And I soon learned there was an informal competition among the department’s auditors to see who could generate the most voluminous workpapers. I joked that the only thing missing was a copy of the phone book — until I found one in a set of workpapers!

The internal auditors had forgotten the cardinal rule that information is “sufficient” if it is “factual, adequate, and convincing so that a prudent, informed person would reach the same conclusions as the auditor.” More pages did not mean better documentation, and each unnecessary workpaper had to be reviewed by the engagement supervisor and again by a quality assurance reviewer.

I am probably more liberal than many of my peers when it comes to documentation and workpaper preparation. I always remind myself that workpapers are a means and not an end. Well-documented workpapers are important for quality control, and they must be comprehensive enough to form the basis of any conclusions we reach and communicate to our clients. But our clients rarely see the workpapers. Writing style might be important in our reports, but it’s rarely an issue in our interview notes.

Being complete, accurate, and reliable is so important in internal auditing that we almost all have trouble knowing where to draw the line during the early days of our careers. But learning to avoid the instinctual tendency to over-audit and over-document is an essential survival skill. Past a certain point, we just can’t work harder, so the only way to increase our effectiveness is to work smarter — to focus on the biggest risks and biggest potential paybacks.

I like to start every working day by asking myself whether the payback from planned activities will justify the time and effort involved in completing my “to do” list. As I organize my list, I think about the urgency and importance of each item and, in many cases, I find that there are tasks that can be pared down or eliminated.

One of the most frequent complaints I hear in internal auditing is that there are not enough hours in the workday to accomplish the assigned work. It’s true that our schedules are often demanding. But if we take the time to focus on what’s most important, and eliminate or curtail what’s not, we might just find that we can accomplish the most important things in life.

How do you manage your time without shortcutting quality? ​