Three Killer Questions for Internal Audit Clients

Asking questions (observation and inquiry) is one of the most critical internal auditing skills. It allows auditors to gain an understanding of processes, objectively evaluate the function and reach logical conclusions regarding the effectiveness and efficiency of operations. It is important, but often times difficult to remain objective when attempting to understand a client’s process.  It becomes easy fall victim to “confirmation bias”.  This is the practice of asking questions that confirm our beliefs.  For example, if an area is known for fraud, auditors may limit questions to those surrounding processes where known frauds have historically occurred.  Doing this, ignores the total process and auditors run the risk of not focusing on the true risks in the area.

So here are the three killer questions

  1. What is the process for (insert process)?

  2. Who else is involved in the process?

  3. How would you improve the process?

Now let’s put them into context.

What is the process for (insert process)?

It is important to be extremely objective when exploring a new process.  By asking the open question, “what is the process for…” says that you are open to receiving what the client has to say.

For example, assume you are starting an audit of the payroll process and you are meeting with a payroll processing clerk.  You’ve been told she specifically handles payroll taxes.  You could start off by saying,

“I understand you handle payroll taxes.  Tell me more about that.”

Well, what you will get is a direct answer about payroll taxes.

On the other hand, saying, “What is the payroll process and where do you fit in it?”, will get a different response.

First, the second actually is a question.  Secondly, you are asking the clerk to describe the entire process as s/he sees it.  This gives you, as the auditor, the opportunity to get a perspective on the incoming and outgoing dependencies from this persons standpoint.  Now, when you do that with everyone, you can effectively put the pieces of the puzzle together.  Additionally, someone may mention a step that is a bottleneck in the process for them.  This gives you the opportunity to explore it and provide them with either a resolution or an answer as to why the bottleneck exists.

I think it is extremely important to ask about the entire process when discussing functions with staff.  This includes their direct duties as well as dependent processes.  This provides the auditor with a good understanding of not only the actually process but the how the staff perceives the process.  With this understanding, the auditor will be able to identify more bottlenecks while building goodwill with various staff involved in the process.

Who else is involved in the process?

Have you ever been in the middle of auditing a process only to discover that you were talking to the wrong person or that the process was more complex than you initially realized.  Let me give you an example.  I remember interviewing an accounts payable clerk at an organization for about a week.  During that time frame, we covered the process from beginning to end, or so we thought.  With our understanding of the process, we moved forward into detailed testing.  At some point during the testing, we were made aware of another unit in a remote location (now remember everything…well almost…was centralized) that processed manual checks.  The activity was so small, they only reported back to headquarters quarterly.  We didn’t ask the simple question, who else is involved, and no one told us.  The information was not “withheld” but rather unintentionally omitted.

Identifying all parties in the process helps to ensure you, the auditor, has a good understanding of the operating environment.  The question, “who else is involved…” can be phrased many different ways to determine interdependencies.  For example, you could ask:

  • Where does the information contained in this report originate?

  • Who receives this report?

  • Do you provide this data to any other groups or departments?

How would you improve the process?

Auditors love process improvements.  It’s always great to help your organization improve what it does and how it does it.  The greatest ideas come from those who directly perform tasks.  Unfortunately, those are typically the ones who management does not listen to.  I remember working as a business process consultant helping companies save a lot of money by streamlining operations.  Each idea came directly from front line staff.  We simply helped put the pieces of the puzzle together.  Auditors, front line staff are your biggest ally for process improvement.  Always ask “how would you improve the process?”

There you have it, three killer questions to ask audit clients?  There are many more.

What are some of your favorites and why are they effective?

Robert Berry (108)

Robert (That Audit Guy) Berry is a risk, compliance and auditing advocate, educator and innovator. He helps good professionals become better by creating articles, web services and training that allow them to expand their knowledge network.

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