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Auditing What Matters
Sharon Erickson, San Jose City Auditor
Contact info: [email protected]
(408) 535-1238
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“Legislators, government officials, and the public need
to know whether (1) government manages public
resources and uses its authority properly and in
compliance with laws and regulations; (2) government
programs are achieving their objectives and desired
outcomes; (3) government services are provided
effectively, efficiently, economically, ethically, and
equitably; and (4) government managers are held
accountable for their use of public resources.”
– Government Auditing Standards
Why audit?
Auditing What Matters
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The role of the auditor
Auditing What Matters
“Auditing is essential to government accountability to the public.”
– Government Auditing Standards
• Responsibility to the public • Asking uncomfortable questions• Are we just testing controls OR are we providing
independent, objective assessment of performance
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Selecting audit subjects that matter
Auditing What Matters
• Important, relevant, timely
• The first of many decision points• Annual citywide risk assessment• Role of suggestions and organizational knowledge
EXAMPLES:Employee health benefits
Pension sustainabilityTake home vehicles
Animal servicesStreet maintenance
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Decision points every day
Auditing What Matters
• Choices in direction• Audit selection• Audit scope and objectives
• Allocating resources (staff and time)• Prioritizing• Testing• Extending testing
• Interpreting results• Reporting results
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Deciding what’s important
Auditing What Matters
Important =consequential, significant,
far-reaching, critical, crucial, pivotal,
momentous, serious, grave, urgent,
substantial, weighty, valuable, relevant,
influential
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A question of judgment
Auditing What Matters
• Importance of independence, objectivity, and due professional care • Balanced• Realistic• Open-minded, objective evaluation
• Experience diagnosing problems
• Little details; big picture
• Tough, but fair
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Gauging significance
Auditing What Matters
• Looking for patterns
• Frequency
• Significance
• Materiality
• Risk
EXAMPLES:Pension Sustainability
Retirement TravelAirport Concessions
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Audits that challenge existing policy
Auditing What Matters
• Selecting audit subjects that matter• Have you asked why?• Do you stop once you’ve audited to the current
policy?• The next logical inference• A question of judgment
EXAMPLES:Pension ReformHealth Benefits
Police CivilianizationTeam San Jose
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Audits that are relevant and timely
Auditing What Matters
• Role of the auditor• Aware of your surroundings• Upcoming issues facing your jurisdiction• Responsive
EXAMPLES:Recovery Act
Cardroom LicensingTake-home Vehicles
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Importance of audit planning
Auditing What Matters
• Start with broad overview• Preliminary survey• Risk assessment
• Professional skepticism • Significance• Deciding the type and extent of audit work• Sufficient and appropriate audit evidence• Audit risk
EXAMPLE:Health Benefits
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Thinking critically
Auditing What Matters
• Evaluating evidence• Professional skepticism• Attitude
Accepting – Open-minded – Overly criticalOptimistic – Realistic – Pessimistic
Disinterested – Curious – Suspicious• Hard work• Pulling the thread• Questioning attitude• No coasting
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Thinking strategically
Auditing What Matters
• Selecting audit subjects that matter• What interests you?• What piece seems most important?• Why?
• Being aware of your surroundings• Changing environment• Timing
• What will be deemed relevant and actionable?• A question of judgment
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Formulating audit conclusions that matter
Auditing What Matters
• Allowing sufficient time to interpret results• Distilling the main idea• Balancing details and big picture• Not just that the writing process takes too long
• Thinking critically about the overall/combined result• Assessing materiality and impact• Relevant and actionable recommendations
EXAMPLE:Animal Services
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Writing audit reports that matter
Auditing What Matters
• Focus on what’s important• Use definite, specific, concrete language• Clear, persuasive conclusions• Clear, actionable recommendations Impact
• Avoiding confusion • Use of graphics• Whose story is it? • Placing yourself in the background
• Avoid overwriting or overstating conclusions
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Recommendations that matter
Auditing What Matters
• Actionable• Impact service delivery• Will this recommendation make a difference?• Talk to people on the front line
• Quantifying audit benefits• Calling out recommendations with potential budget
impacts• Relentless follow-up
EXAMPLES:Pension Sustainability (SRBR)
Police Civilianization $5.1 million
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SUMMARY
Auditing What Matters
• Select audit subjects that matter• Decision points every day• A question of judgment• Gauging significance• Thinking critically• Thinking strategically• Formulating audit conclusions that matter• Writing audit reports that matter• Recommendations that matter