CHAPTER 9 Documenting issues

• When there is a discrepancy between the criteria and existing conditions, the CCCER/5C model provides a structured, reliable, simple, yet effective framework to document these conditions.
• Criteria are the performance standards or expectations set by relevant stakeholders. The criteria are used in making the evaluation or verification and consist of the expected performance.
• Condition refers to what the auditor discovered as a result of applying auditing procedures. It \\is the factual evidence that the internal auditor found during the review.
• Cause is the reason the condition exists. The cause explains why there is a difference between expected and actual conditions
• Effect constitutes the consequence of the condition identified. It relates to the risk or exposure the organization, program, process, or others will face because the condition is not consistent with the criteria. The effect is the impact resulting from the problem itself
• Recommendation is the action, or collection of actions, that if successfully implemented, will neutralize the cause, stop the effect, and restore the condition to the desirable state (i.e., criteria)
• Making Findings and Recommendations Persuasive

  1. Quantify as much as possible.
  2. Make sure findings are significant.
  3. Consider the cost/benefit involved.
  4. Use appropriate language.
• AUDIT REPORT TERMINOLOGIES

  1. Use a readable report format.
  2. Order of importance.
  3. Compressing findings
  4. Too lengthy
  5. Proper tone
• Using Quantitative Methods to Improve the Quality and Impact of Audit Findings

  1. Persuasion based on fact or reason
  2. Persuasion by appealing to the character of the presenter
  3. Persuasion based of emotion
• Persuasion based on fact or reason

  When this is used, the process is based on the fact that people believe they are logical and reasonable, so if we appeal to this through data, we expect them to respond accordingly and be persuaded by the strength of the evidence. But this is only one of multiple approaches.
• Persuasion based on the character of the presenter, who must betrustworthy, honest, intelligent, or otherwise credible
• Persuasion based on emotion (i.e., pathos). In this case, persuasion is based on expressing feelings on a subject, getting an emotional reaction, or both
• Persuasion and Diversion (TECHNIQUES)

  1. Repetition
  2. Will of the majority.
  3. Generalization.
  4. Creating information
• Repetition. By repeating an argument often enough, the perpetrator hopes that the frequent repetition creates legitimacy
• Will of the majority. Another approach is by representing one’s argument as if it were the will of the majority. This gives the person’s argument the aura of legitimacy
• Generalization. Making unwarranted generalizations that represent one’s behavior as that of the whole is another way to distort the truth
• Creating information. Some individuals attempt to present a different version of the truth. This can be done by choosing to exclude some information that if known would have resulted in a different opinion
• Internal auditors should remember that the evidence should meet certain criteria:

  1. Verifiable
  2. Transparency
  3. Sufficiency
  4. Reliability
  5. Relevancy
  6. Usefulness
• Verifiable. All results should be based on reliable facts, figures, and documents that others can inspect independently, and by applying the care and judgment of a reasonable person, arrive at the same conclusion.
• Transparency. When there is a legitimate need and authority to do so, the facts, figures, and documents should be available for review by others.
• Sufficiency. The facts, figures, and documents used during the review should be enough to convince an equally qualified, prudent, and unbiased person.
• Reliability. The facts, figures, and documents used should be free from tampering, or significant and unexplainable quality variances, prepared by a suitably qualified individual or system and provided timely for review and analysis.
• Relevancy. The facts, figures, and documents used during the review should be applicable based on the scope of the review and the objectives of the organization, program, or process.
• Usefulness. The facts, figures, and documents used should help the organization, program, or process improve its operations, and enhance its ability to achieve its objectives.
• The Standards state that “Internal auditors must communicate the results of engagements”(Standard 2410).
• Reporting audit observations are a key requirement for internal auditors, and the board and management expect internal auditors to be their “eyes and ears” about what is happening in their organizations.