Written Audit Reports Explained | Fundamentals of Internal Auditing | Part 38 of 44

Summary

In this episode, Hernan Murdock and Kathleen Crawford delve into the intricacies of written communications for internal auditors, focusing on the crafting of audit reports. They emphasize the importance of these reports as the final product, addressing key questions about system efficiency and providing a clear, concise, and persuasive narrative. The discussion covers report structure, timeliness, clarity, and the significance of avoiding surprises and maintaining a positive tone to encourage action and foster trust with stakeholders.

Takeaways

• 📝 The audit report is the final product of internal auditors, serving as an outward-facing document that encapsulates the results of the audit.
• 🔍 Audit reports are designed to answer three fundamental questions: whether systems are working as intended, why they might not be, and the implications of any discrepancies.
• 🎯 The 'so what?' question is critical in determining the relevance and significance of issues included in the audit report, ensuring they are consequential enough for senior stakeholders.
• 👥 The audit report is distributed to a wide range of individuals, including those closely involved in the engagement and potentially the board of directors.
• 🗂️ The structure of an audit report typically includes an executive summary, background information, audit objectives and scope, and detailed results with observations and corrective actions.
• 🚀 Timeliness is crucial for the audit report's relevance and impact; reports should be issued as quickly as possible after fieldwork, without sacrificing accuracy or persuasiveness.
• ✍️ Improving writing skills and utilizing templates can streamline the report creation process, reducing the need for multiple levels of review and enhancing efficiency.
• 📑 Alternative formats to traditional text-heavy reports, such as PowerPoint presentations, can offer a more visual approach that may be preferred by some stakeholders.
• 🤝 Setting expectations and timeframes with clients is important for collaborative working relationships and meeting deadlines.
• 📈 Including management's corrective actions during the audit process can positively influence the report and demonstrate proactive measures taken to address issues.
• 📉 The tone of the report should be positive, emphasizing the benefits of addressing identified issues, and not just focusing on the negative aspects.
• 📊 Current trends show a move towards shorter reports and a decrease in the use of executive summaries, suggesting a preference for concise and direct communication.

Q & A

What is the primary purpose of written communications for internal auditors?

The primary purpose of written communications for internal auditors is to serve as the final product that communicates the results of the audit engagement, meeting the IIA standards on communicating engagement results.

Why is the audit report considered the outward-facing product of an audit?

The audit report is considered the outward-facing product because it caps off the audit process and is distributed to stakeholders, including senior management and board members, who rely on it for relevant information.

What are the three fundamental questions an audit report is intended to answer?

The three fundamental questions an audit report aims to answer are: 1) Are systems, policies, and procedures working as management intends? 2) If not, why aren't things working as intended? 3) If not, so what? What are the consequences and what actions should be taken?

Why is it important for the audit report to be free from non-consequential issues?

It is important for the audit report to be free from non-consequential issues to maintain its relevance and focus on significant matters that require attention and action from senior leadership and board members.

What is the role of the executive summary in an audit report?

The executive summary in an audit report plays a crucial role by highlighting significant issues in an abbreviated form, allowing busy senior executives to quickly grasp the key findings and decide whether to delve deeper into the report.

What should be included in the background section of an audit report?

The background section of an audit report should provide a brief overview of the type of audit performed, what was audited, and necessary context without extensive detail, such as the significance of the area to the organization, volume of transactions, and any relevant historical information.

Why is it suggested to include the audit team members in the report?

Including the audit team members in the report helps to provide transparency and accountability, as it identifies who was responsible for the audit process and findings.

What构成s the results section of an audit report?

The results section of an audit report consists of observations, conclusions, and corrective actions. It may also include suggestions for improvement, depending on the organization's culture.

How can the audit report be made more timely and persuasive?

The audit report can be made more timely by setting expectations and writing sections as the audit progresses. To be persuasive, it should be clear, concise, and free from surprises, while maintaining a positive tone and focusing on the benefits of change.

What are some alternatives to the traditional audit report format?

Alternatives to the traditional audit report format include using PowerPoint presentations to convey the findings, which can be more visually engaging and concise, and then distributing the presentation slides for further review if needed.

What is the significance of including client responses in the audit report?

Including client responses in the audit report is significant as it demonstrates management's acknowledgment of the findings and their commitment to addressing the issues, fostering a collaborative approach to improvement.

What trends have been observed in audit report lengths and the use of executive summaries?

Trends observed include a decrease in the use of executive summaries and an increase in the percentage of reports that are 10 pages or less, suggesting a move towards more concise and focused reporting.