Body Language | Timing | Authors | AI | Tools | Expensive Existence
New year new me, who dis?
It’s been a busy time in my life! Between work stress, holiday festivities, livestock expansion (see more about that here!) and some pet health challenges, we’ve definitely had our hands full. We are embracing the chaos while learning and trying to maintain consistency to feel sane during this busy time. This week’s newsletter is packed with updates, lessons, and tips we’ve discovered—so let’s dive in!
As a reminder—
- AuditPal Spotlight: Highlights of internal audit trends.
- Back of the Napkin: One new thing I learned this week.
- Borrowing Inspiration: Ideas or tools from other fields.
- Auditcraft: Update on what I tried or failed at this week.
- Tools of the Trade: A roundup of interesting ideas I found.
- foo: Random thoughts or ideas not necessarily related to audit.
Now that you’re up to speed, read on! 🙂
AuditPal Spotlight:
The importance of body language
Ok… Maybe I just really wanted to use that gif (and that’s gif not jif you weirdos)… What I really wanted to talk about was the importance about how you approach clients or business unit leaders, which yes, does include body language.
I think there is a misconception within internal audit or just audit in general, where we have to be the perceived expert in the field that we are auditing. Unfortunately, that’s almost never the case for auditors because we aren’t subject matter experts on the vast majority of topics. In fact, I would say that of any skill auditors could be considered experts at, it would be identifying the experts and getting them to talk to us.
This brings me back to my original point about Ursula and the merfolk. If people see us as sea witches coming to pull one over on them and “steal their voice”, they won’t ever trust us or allow us to help them.
The most important skill for auditors is being genuinely curious in the work your client or business unit leader does and getting to know them and their role. This goes for any person you speak to by the way, from the CEO to the interns, being interested and letting them talk about their work and lives will help you as well as them.
Overall, this spotlight is focused on those non-technical skills that newly minted auditors may pay less attention to when so many technical skills are at the forefront of their minds. However, being able to have interesting conversations and really dig into an issue and understand the pain points of your clients by listening and understanding is the real critical skill of an auditor.
Tom O’Reilly, Founder, Internal Audit Collective (highly recommend his newsletter by the way), performed an interview with Laura Perkins, Vice President of Internal Audit – THOR Industries where she touched on this a bit. “As internal auditors, we bring unique insights that complement those of subject matter experts. The key is having open discussions…”. As auditors, we need to be comfortable asking questions and coming from a place of learning and not just telling
Back of the Napkin:
Timing is everything
Timing is everything, even when thinking about SOX. I recently discovered that when public companies who are subject to Sarbanes-Oxley compliance acquire a company or pieces of a company large enough to be material, there is a grace period for SOX compliance on those assets. However, the interpretation only allows for a one year exception. Which will be incredibly important for reasons I will explain below.
The SEC published a frequently asked questions on ICFR reporting, which states,
“we acknowledge that it might not always be possible to conduct an assessment of an acquired business’s internal control over financial reporting in the period between the consummation date and the date of management’s assessment… …the period in which management may omit an assessment of an acquired business’s internal control over financial reporting from its assessment of the registrant’s internal control may not extend beyond one year from the date of acquisition…”
The interesting part of this though, is that the date of acquisition is incredibly important because annual filings are, as the name suggests, annual. Meaning that if a material acquisition were to occur on December 31, 2020, then one year from the date of acquisition would be December 31, 2021, but had the business waited until January 01, 2021 (one day later) then the business would have until January 01, 2022, in which your annual filing would occur for fiscal year ended December 31, 2022. One day would allow for almost two years of exemption time, talk about the importance of timing!
Borrowing Inspiration:
You are an author, act like it!
In writing and story telling there is a technique of sorts that many writers use to aid them when writing scenes. This same approach could be used in audit report creating to instill persuasiveness and get key stakeholders to really buy-in and read your report. The technique is called the “Save The Cat” technique. The idea is that human brains and our stories we like follow a somewhat formulaic approach. The hero gets the girl, the sidekick is a funny animal, and the old guy turns out to be a super powerful wizard or something.
This technique is a popular story structure method developed by Hollywood screenwriter Blake Snyder. This technique is widely used by both novelists and screenwriters to create engaging and well-paced stories.
While it may not necessarily fit into the perfect frame for audit reports, we can still dissect the methods and take some creative freedoms (like any good author should do… Rules are made to be broken!)
- Set the Scene: Begin by establishing the context—who the key players are (departments, processes, stakeholders) and what the audit is intended to uncover. Explain the reason behind the audit, the scope, and the potential risks to set the stage for what follows.
- Develop the Characters: In a story, characters evolve as the plot unfolds. Similarly, highlight the “characters” in your audit—the processes, departments, or systems under review. Introduce the risks or issues associated with these characters, making it clear who or what is at the center of the audit’s focus.
- Build Tension: Every story has a moment of conflict or tension. For auditors, this could be the uncovering of significant risks, fraud, or inefficiencies. These issues should be presented clearly and in a way that highlights the potential negative impact on the organization, drawing in the audience’s attention.
- Showcase the Climax: The climax is when the story reaches its turning point. Similarly, auditors should illustrate the potential consequences of the audit findings if left unchecked. Quantify the risks in tangible terms, such as financial losses, reputational damage, or operational inefficiencies. Many might call this the “So What?” factor, or why these findings matter.
- Provide Resolution: In a well-rounded story, the tension is resolved in a way that brings closure. For auditors, this means providing clear, actionable recommendations. These should be presented as the “resolution” of the audit story—how the organization can overcome the challenges and strengthen its controls, processes, or operations.
- End with a Call to Action: Every story needs an ending, but it shouldn’t be a passive one. Leave the stakeholders with a sense of what action is required. Ensure your audit’s resolution is actionable—what specific steps should leadership take to address the findings and avoid future risks?
Auditcraft:
Artificial intelligence to artificially inflate my intelligence
Many audit departments have established goals to start using emerging technologies and tactics such as AI, data analytics, and continuous auditing to enhance their skills or assist them in their tasks.
Being the good student of the world that I am I decided to get two stoned birds twice… or two birds with a stone? Something like that… anyways- I used ChatGPT (no particular recommendation, there are a ton out nowadays from all the big players: Gemini, Bard, etc.) to spit out a bunch of analytical tests that can be performed on business expense data. The following was what I input into ChatGPT and then its response to my query (that I ran through a really cool tool called Datawrapper for visualization purposes – maybe I should put this in the “Tools of the trade” section?):
Zac:
“You are an expert internal auditor. You are performing an audit of business expenses incurred at your company, which is in the aquaponics industry. Create a list of fraud tests that can be performed on business expense data within excel or Power BI and expand on the what the test is, what it is trying to find, and why. Rank these options starting from highest priority to lowest priority”
ChatGPT:
Tools of the Trade:
Zac approved, Zac recommended
- Use: Lucid Chart —perfect for mapping out control processes.
- Read: Atomic Habits by James Clear (a guide for small, sustainable improvements).
- Watch: TED Talk: How Great Leaders Inspire Action by Simon Sinek.
foo:
Existing is expensive nowadays
Why does everything in audit have to be so hard to find? I swear, learning how to audit would be impossible without working in the industry. Everything is pay-walled behind a membership, class, conference, or company and made so complicated no normal person could even understand. Why don’t we have free tools or resources such as Stack Exchange for audit?
I think this would go a long way to getting more high school and college grads into accounting and auditing in general. Which is something we sorely need… (or maybe it just means our skills will be worth more in the future?). In fact, Going Concern posted the following article, “Even People Who Majored in Accounting Don’t Want To Be Accountants”, which highlights a few of the problems such as long hours, lower pay, and not feeling their work is that important.
Hopefully, as the new generation of accountants start to share their positive experiences and start leaving a mark on the industry, we’ll see positive changes. Maybe one day prospective accountants see this post and decide that it can be worth it and they can be confident in their skills from having listed to Zac – maybe… maybe…
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