Insights

Why You Should Think Like an Auditor

Why You Should Think Like an Auditor

May 03, 2016

One of the most common questions asked in everyday conversations is, “What do you do for a living?” I respond with, “I am an auditor,” which typically elicits a verbal or nonverbal “Ugh!”

Maybe auditing isn’t for everyone, but auditors have a unique perspective that can benefit any manager. We tend to ask a lot of questions from an independent point of view to gain an understanding of an organization’s operations. While it may seem we dwell on the negatives and the “what could go wrongs,” we are usually following a process that helps us challenge the status quo to see whether something’s been missed or whether there might be a better way.

Here are some of the ways an auditor thinks that could help you better manage your organization (and maybe even your life).

Are You Thinking About Risk?

As auditors, we are constantly thinking about risks and how risks are managed. An organization must manage a variety of risks if it is to be successful for the long term. Think about all the different risks an organization might encounter. For example:

Fraud. Auditors are often associated with fraud risk and trying to find fraud. As you may know, most fraud is not discovered by auditors, but rather by employees and/or internal controls that are working properly. It is very important for managers to take to time to consider where fraud is most likely to occur and how it can best be detected or, better yet, prevented.

Information Systems. Many different types of risk are directly related to information systems, including cybersecurity, business continuity, and even reputation. Because of the significance and complexity of information systems for most organizations, it is important that expert specialists are continually evaluating and monitoring vital systems.

Human Capital. People are truly the most important asset of almost every organization. So do you consider how a higher-than-average turnover rate might impact the organization? Do you think about the effect should a key employee leave? What would happen if people were not properly trained?

Disruption. Disruption could refer to a number of events such as a short-term shutdown of a factory for a few hours, a longer-term shutdown resulting from a natural disaster, or even an industry-changing event. Taxi cab drivers around the world are still coping with the disruptive event that is Uber. Although it can be difficult to contemplate all the various possible disruptive events, it is still important to consider and manage these risks.

These are but a few of the risks organizations may encounter on any given day. Thoughtful planning and ongoing evaluation and monitoring are keys to managing risk to minimize any potential negative impact.

Are You Thinking About the Big Picture?

Another skill many auditors develop is the ability to think critically. Yes, we are famous for looking at the details, but it doesn’t begin or end there. Before we dive in to look at the trees, we usually step back to consider the forest. What do we expect to see when we start looking at the details? Does it make sense based on other information we know? If we find something unexpected, we might ask questions to help us create expectations of what we will ultimately see “in the trees.”

We also understand not all details are equally important. We must process the information we encounter and decide what can have the most significant impact and thus requires the most attention. As we look at the details, we may discover something about an unrelated area that we either use when looking at that area or share with others who can use that information.

When we are “done,” we are not really done. One more look at the big picture is typically in order. Did the information we looked at confirm our initial expectations? If not, is it important? Do we know why, and does it make sense? Finally, do we need to let others know what our findings are? Critical thinking is not easy, but it is necessary to successfully manage almost any organization.

Do You Challenge Your Thinking?

Ronald Reagan famously made the Russian proverb, “Trust, but verify,” his motto when discussing U.S. relations with the Soviet Union. Auditors refer to this as professional skepticism. It helps us avoid the trap of thinking that if nothing bad has happened in the past, it shouldn’t happen in the future. As financial planners are quick to remind us, past performance does not guarantee future results.

Change is an ongoing part of an organization’s operations, which brings with it the real possibility that something we thought to be accurate is no longer so. For example, an information system update causes a report to no longer produce accurate information. Employee turnover results in a control no longer operating because information was lost in the transition. A life change causes an employee to consider exploiting a control weakness for the first time.

This does not mean we need to question every report we see or distrust every person with whom we interact. But we should be prepared to verify information that doesn’t quite make sense rather than accept it simply because it came from a trustworthy source. It means we should periodically test controls, processes, and/or systems to see whether they are operating as intended, especially when we know a significant change has occurred. We should not believe something must be true because it was true yesterday.

“Trust, but verify” can be a valuable motto to live by to make sure we are not assuming when we should be thinking.

Thinking Like an Auditor

You might have laughed when you first saw this article’s title, wondering why you would ever want to get into the head of an auditor. But I believe there are a number of skills auditors regularly use that can improve the odds of success within an organization. Managing risk, critical thinking, and using professional skepticism are just a few of the skills we regularly use to help our clients succeed in their efforts. None of these skills can be developed without some time and effort, but all of them will help you and your organization thrive for years to come!

Author(s)

Schwantes_Brett
Brett D. Schwantes, CPA
Senior Manager
View Profile