Auditing Alerts

In today’s fast-paced world it is very easy for any business unit to become so focused on immediate objectives it forgets the impact of events in the immediate area. To assist in their preparedness, this white paper will propose a new series of warnings, watches, and advisories to be issued in the event of upcoming audit activities. The intent of these is to help ensure the health, safety, and sanity of all individuals involved in the audit process. 

To begin, we need an understanding of the differences between a watch, a warning, and an advisory. To illustrate these differences, we will use the most fundamental and most important of the new updates – the audit advisory, the audit watch, and the audit warning.
The least serious of these is the “Audit Advisory”. Advisories are intended to alert the business public about potential audit conditions that may have some modest impact on or cause moderate disruptions within the area of operations. Usually, these conditions will cause little threat to operations and jobs. An audit advisory would be used to warn of an approaching routine audit. While all should prepare, there is little need to take shelter or begin destroying files.
An “Audit Watch” (an upgrade from an audit advisory) means that conditions are right for a potentially damaging audit to happen. In this situation, no auditors have been spotted, but there are activities that indicate an audit might be started at any time. Such conditions might include numerous out-of-balances; unreconciled accounts; an unacceptable volume of customer complaints; a secretary and her boss constantly travelling to the Bahamas; or any other indicators that controls are in a critical condition.
An “Audit Warning” (an upgrade from an audit watch) means the audit is imminent or already happening. Such an announcement is issued when auditors have been spotted in the area and the chances of a damaging audit occurring are very high. Other signs that might lead to an audit warning are shredded documents, missing executives, and mass resignations.
With a basic understanding of the advisory, watch, and warning, additional categories can be introduced – categories which make the audit announcement universe more robust.
Flood Warnings and Watches: At some point during the audit, the auditors may determine the need for a great amount of detail. The imminent flood of requests will result in a watch or warning. This is not to be confused with a Flash Flood Watch or Warning. Flash flood announcements are issued when there is evidence of a downpour of negative criticism by the auditors toward other departments and the problems are about to flow downhill through your department.
Wind Advisories: Two different situations may result in wind advisories. The first is when the audit department begins setting up meetings. If the meeting per employee ratio is more than one, a wind advisory will be issued.   If that ratio goes beyond three, a high wind advisory will be issued. The second situation is when it is determined the auditors have worked for the company more than 25 years. This phenomena (commonly known as the “In My Day” Scenario) will also result in a wind advisory.
Heavy Snow Watches and Warnings: These will be issued when it looks as though the auditors have not done the work required and are issuing reports without a proper understanding of the issues. Heavy snow warnings will occur when conditions such as lack of preparation in meetings, no evidence of note taking, and no requests for supporting documentation are evidenced by the auditors. Blizzard watches and warnings are issued when the size of the report is expected to exceed 20 pages. (To provide complete transparency, it should be noted that Internal Audit also uses heavy snow and blizzard warnings depending on the content of the auditees’ responses.)
I hope you find these announcements valuable. And I always welcome any additions you may have.

Posted on Mar 30, 2011 by Mike Jacka

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