THE PSYCHOLOGY OF AUDIT

by Joan Pastor, Professional Speaker and Trainer

Twelve years ago, I gave my first presentation ever to a group of internal auditors at the annual conference of the IIA Boston Chapter.  It was an all day seminar on “How to Resolve Conflict and Positively Influence Others,” and I was facing a packed room of mostly male, mostly graying auditors.  I was addressing the concept that auditors – as profit-based professionals -- have customers too.  I quickly realized that my audience did not quite understand the importance of looking at auditees as their customers.

To clarify my point, I asked the audience:  “If I were to ask your clients for the first word that comes to mind when thinking of internal auditors, what would I hear?” 

 There was complete silence, and then a low ripple of laughter.  A hand went up.  From the back of the room, I heard the word:  “Cops.”  Another hand went up:  “Trouble-makers.”  There were several more negative generalizations, including “a pain in the neck,” and “there to play ‘gotcha!’” 

Since that time, I have seen an incredible change in the philosophy and practice of internal audit, most of it falling under the rubric of “value-added auditing.”   By 1993, the list of negative words that clients invariably gave me started including some neutral, and even positive words, such as “collaborators,” “advisors,” and even those magical words “very helpful.”

Another word that appeared regularly was “consultant,” or “internal consultant.”   This designation stirred up (and still does) wide debate within audit professional associations as to whether being a consultant could and should include being involved in setting up controls (i.e., quality improvement teams) or being involved in implementation after the audit.

Once Control Self-Assessment (CSA) became a viable option in auditing methodology, there were times when the list did not contain any negative words about auditors at all! 

The death of “gotcha!” is a bit premature

Nevertheless, the death of “Gotcha!” auditing is a bit premature.  Even with the improvement of audit’s image in some organizations, it has not gone as far as it perhaps should and could go.  There are still large pockets of resistance to new approaches (CSA) in auditing methodology. 

Let’s look for a moment at the different auditing cultures that I have encountered over the years  - from value-added organizations to those groups that have not subscribed to CSA.  My ultimate focus will be on the psychological reasons behind the latter group’s tenacity in “conducting business as usual,” and the real benefits in changing one’s approach. 

Auditing cultures

1. There are a few audit departments that operate as much as possible from a value-driven perspective.  They have worked hard to position themselves as a necessary and useful asset to other departments, where they have helped employees to see that everyone’s ultimate loyalty is to each other, their customer(s), and the health of the organization.  The audit department uses a variety of value-added methodologies, including CSA (along with more conservative methodologies to assess fraud); their services are sought out on an ongoing basis.  Employees will let auditors know about fraud because they have a comfortable relationship with their auditors.

2. A second group of auditors – for whom I have a great fondness -- truly understand what it means to be value-driven, but they are facing some real resistance from their audit or executive management, their audit committee, or from their own staff.  These auditors are fighting the good battle and are actively engaged in trying to change perceptions of the auditor’s role at various critical levels within their own organizations.  They are not just going along with the dictates of their management or audit committee, but are actively networking and educating people in key positions as to how they can provide the same – if not more – value to the organization by expanding their role and/or their position.  The biggest challenge is when there are differing philosophies within the audit department.  Whenever one sees increased turnover (other than expected departmental rotation), you can bet there is a split.

3. The third group of auditors or audit departments is philosophically in agreement with the first group, but they don’t really understand how a collaborative relationship with their customers can increase their ability to find and address exposure.  This group has an even harder time with the idea that employees in the work area may understand the critical risk and controls even better than the auditor.  This group agrees that it is important to empower the workforce to determine their own risks and controls, but at the crucial moment they pull the rug out from under their customer(s)’ feet by not letting the people in that department or work area make the final decision.  Instead, the final decisions are kicked back up to the managers and auditors to make, who are traditionally the very group that knows the least about what is really going on in the department.

4. The last group are the auditors who believe current directions in auditing are a huge mistake, that methodologies such as CSA are a bunch of hooey, and that audit should be the eyes and ears of management, period.  They actively practice “Gotcha!” and cannot understand the role that relationship and people skills have in successful auditing, even in fraud investigations.

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