5 Fundamentals of External Auditing
Auditing fundamentals for those in the external arena can be funnelled down to five key points: honesty, innovation, empathy, familiarity and independence. With these five skills in grasp, External Auditors are best prepared to succeed. But what to each of these points cover? We take a closer look:
- Honesty, always
Remaining honest seems obvious, but when dealing with global corporations and high-level stakeholders, the truth can sometimes get muddled with intimidation and the pressure to please. After all, delivering negative news is not an aspect of the role which many External Auditors enjoy.
With the line between sugar-coating and lying easily muddled, auditors crossing lines has frequented headlines of late and perpetuated negative auditing stereotypes. Just look to the 'fraudulent activity' within Patisserie Valerie that was missed by their auditors, and the Carillion scandal where 'terminal failings [were] readily ignored' by their accounting firm.
- Innovation and advancement
Keeping pace with technology and advancing cognitive capabilities is in an auditor’s best interest. With risk landscapes evolving, reactive auditing is a fast-track to failure. This need is particularly important when considering the increased presence of Artificial Intelligence and other advanced technologies in the wider business environment.
For External Auditors, attempting to keep pace requires two considerations. Firstly, auditors need to keep abreast with the technology pushing audit forward. When these technologies are embraced auditors are able to provide greater value. Beyond this, knowing the technology, and more specifically the cognitive technologies, used by the company being audited is vital. When unknown, External Auditors are unable to provide a comprehensive audit.
- Empathy matters
Very few clients enjoy criticism and as a result, External Auditors will frequently find their clients entering conversations with a pre-formed negative perception where critical views are easily interpreted as nit-picking, irrelevant or simply unnecessary. With this in mind, remaining pragmatic and empathetic is needed in all client communication. Whether the client is frustrated, anxious or simply confused, External Auditors should be the steady figure of composure but avoid becoming emotionally detached.
On the other hand, integrity should remain uncompromised. A critical tone is sometimes required for challenging clients or serious situations.
- Know what you are auditing
External Auditors need to know what they are auditing. Whether a multinational aviation company or newly opened business, testing the company’s product or service should always be attempted by an External Auditor.
Whilst sometimes easier said than done, auditors should always strive to know the business they are auditing, whether this involves product testing or intensive company research. It is only with this prior research that an External Auditor can provide a comprehensive audit.
The unsurprising final consideration is independence. Whilst almost tempting to leave off the list given its obvious requirement, remaining independent and unbiased is at the core of working in External Audit.
Obviously, no auditors can be truly independent when working in medium to long-term arrangements. When established relationships exist, a sense of client loyalty can easily see grey areas encroach. Yet, these ongoing relationships do not inherently mean auditors cannot work unbiased or independently.
The above five considerations are vital for External Auditors to stay both within the ethical lines and on a successfully trajectory. With independence, innovation and honesty intact, External Auditors are best equipped for success.