Framing Objectives for Timely Audit Results

Common Reasons for Quick Responses

• Urgent information for management decision
• Known or suspected problem or opportunity
• Explanations for highly visible problem/issue
• Externally imposed deadline
• Health or safety issue
• Free up audit resources for other projects

Urgent Information for Management Decisions

• Many organizations operate in a volatile environment
• Planning horizon is often short
• When operating conditions change, as information is needed quickly
• Auditors are sometimes asked for assistance

Examples

• Impact of pending budget reduction
• Consequences of proposed regulations
• Impact of natural disaster

Known or Suspected Problems or Opportunities

• Management is often in best position to identify problems
• Performance measurement systems and other modern tools often highlight potential problems or opportunities for improvement at early stages
• Managers often know the condition, but need auditors to help identify causes

Examples

• Over-execution of budget
• Decline in transaction processing efficiency
• Dramatic increase in operating costs

Explanations for Highly Visible Problems or Issues

• Government agencies are closely scrutinized by the media and taxpayers
• Minor or discreet problems in the private sector are often widely publicized when encountered in government
• Agency officials often need auditors to help identify quick explanations when problems surface

Examples

• Erroneous tax bills mailed to property owners
• Breach in computer security
• Deterioration in quality of service

Externally Imposed Deadlines

• Government agencies must often respond to short externally imposed deadlines
• Auditors are asked to assist in gathering and reporting information

Examples

• Directives by higher levels of government for operating or performance data
• Request by legislative bodies for operating or performance data

Health or Safety Issues

• Problems may arise which require prompt assessment for health or safety reasons
• Auditors may be asked to evaluate conditions and suggest solutions before consequences become dire
• Some requests cross-cut earlier examples

Examples

• Impact of weather on homeless shelters
• Quality control at water treatment facility
• Impact on crime prevention of proposed budget reductions

Resource Constraints

• Many audit organizations are considering client concerns when formulating objectives
• Excessive cycle time negatively impacts client perceptions
• Some audit organizations routinely plan and execute audits to achieve quick results

Organizations who have separately classified “Quick Response Audits” include:

• US Army Internal Review
• Agency for International Development Inspector General
• US Postal Service Inspector General
• General Services Administration Inspector General

Limiting Audit Objectives is Vital to Timeliness

Audit objectives drive the audit process. Valuable resources will be absorbed and audit cycle time increased if:

• There are too many objectives
• Objectives are too broad

Review: Audit Objectives Defined

• Define purpose of performance audits
• Identify what audits will accomplish
• Often phrased as questions audits will address

These can be formulated based on:

• Existing knowledge
• Information provided by management
• Results of preliminary survey

Review: Form and Content of Audit Objectives

Objectives can be thought of as questions auditors seek to answer. Objectives identify:

• Audit subject
• Performance aspects to be included
• Potential finding and reporting elements auditors expect to develop

Audit objectives that include these four prerequisites will make clear what the audit will accomplish.

Example Objectives

• Is Agency Z processing claims for travel reimbursement by employees in a timely manner?
• If untimely, what consequences are being experienced by employees and the agency?
• If the consequences are significant, what are the causes of delay in processing travel claims?
• Are all state agencies processing claims for travel reimbursement by employees in a timely manner?
• If untimely, what consequences are being experienced by employees and the state?
• If the consequences are significant, what are the causes of delay in processing travel claims?

Too Many Audit Objectives

One key to responding quickly is to limit the number of objectives. Too many objectives will often:

• Add time to the survey and planning phases
• Increase the scope of the engagement
• Generate complex audit plans
• Increase the number and expertise of staff needed to complete the assignment
• Increase the methodology and time required for fieldwork
• Increase the quantity of evidence and working papers
• Increase the complexity and volume of the audit report

Limiting the Number of Audit Objectives

Questions to ask when narrowing the objectives include:

• Who will use the information?
• What information does the user seek or need?
• Which questions would create the greatest risk if unanswered?
• Which question(s) can be answered within the time available?
• How will the information be used?

Objectives That Are Too Broad

A critical step to responding quickly is limiting the breadth of audit objectives. Broad audit objectives often:

• Require extended survey and planning phases
• Result in unfocused and extensive revisions to audit plans
• Increase the staff days needed to complete the assignment
• Result in fragmented and disorganized audit methodology
• Frustrate activity officials
• Increase the quantity of evidence and working papers
• Result in unfocused and unwieldy reports with ambiguous conclusions and recommendations

Limiting the Breadth of Objectives

Broad objectives are often “open-ended,” meaning they:

• Identify only the audit subject
• Are imprecise in identifying intended results
• Have an unstated purpose, often to:
  • Find a problem of significance to report
  • Identify opportunities for improvement

How to Limit the Breadth of Objectives

• State objectives in answerable form, as questions or “to determine” statements
• Limit the objective to one subject
• Develop selected finding elements
• Limit the performance aspects (e.g., focus on one aspect)

Audit Objectives Based on Finding Elements

Government Auditing Standards allow audit objectives to be developed around specific finding elements. Common quick-response circumstances include:

• Only a condition is being sought
• The condition is known (cause is being sought)
• The condition is known (effect is being sought)
• Some or all elements are known (recommendations are being sought)

Objectives Seeking the Condition

Some quick response audits are only needed to validate the “condition.” The audit may be prompted by:

• Concerns about a condition without any specific indication that a situation varies negatively with criteria
• Concerns arising from allegations that a situation exists that varies negatively with criteria

Audits seeking an adverse condition require criteria. A quick response can be compromised if criteria are not known at the start of the audit. However, if the agency does not have a policy or standard of what is desired (a goal), this might be treated as the audit finding.

Effect = Criteria compared to Condition

Example Objectives Absent Any Specific Indication of a Negative Condition

• What is the average processing time for unemployment compensation claims?
• What is the Department’s computer security policy on use of passwords?
• What is the occupancy rate in office buildings the agency occupies?
• What is the current passenger security-screening rate at each of the nation’s airports?

Example Objectives in Response to Allegations or Concerns That a Negative Condition Exists

• What percent of unemployment compensation claims were not processed within 10 days as required by Department policy?
• How many agencies are not in compliance with the Department’s computer security policy on use of passwords?
• Does the occupancy rate for agency-occupied office buildings in “Midtown” meet General Services Administration guidelines?
• How does the current passenger security-screening rate at Atlanta and Denver compare with the rates at other major city airports?