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Audit Inquiry -- Alleana Leonard
ISSS Meeting at Asilomar, June 28-July 2, 1999
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Paper session, June 30, 1999, 3:45 p.m., hosted by Enrique Herrscher
These participant's notes were created
in real-time during the meeting, based on the speaker's presentation(s)
and comments from the audience. These should not be viewed as official
transcripts of the meeting, but only as an interpretation by a single individual.
Lapses, grammatical errors, and typing mistakes may not have been corrected.
Questions about content should be directed to the originator. These notes
have been contributed by David Ing (http://coevolving.com) at the IBM AdvancedBusiness Institute ( http://www.ibm.com/abi ).
Alleana Leonard
The auditor traditionally has been an dominator.
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Now an assurance service.
The egocentric manager would never be caught in an audit, because it's
not illegal.
How do you know an organization, private or public, is performing?
Wilber's 4-quadrant model
Traditional audit relied on the earlier world, when you could observe.
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Used to have segregation of duties: e.g. ordering, processing, paying.
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Now, more likely for the person to be the same.
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Observability as Foucault discusses Panopticon.
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Today, assumption that observable, and that there's a single perspective
of observation.
Externally observable activities are observable and work, but hard to be
efficient.
Can't deal with internal and group internal states. Will they bring
about the objectives.
Interviewed 40 auditors, journalists, in 3 countries, all open ended.
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Gave wealth of information on how to improve inquiry.
How can we alter what we need by reliability.
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Need sufficient appropriate audit evidence
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Appropriate means relevant.
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Relevant, you don't know until afterwards.
Is the individual operating with integrity?
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Everyone has intrinsic biases.
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What assumptions are being made?
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Are they compatible with the organization.
Need to also audit the auditor and the audit process.
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Can people tell bad news without being shot?
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How many perspectives are being viewed?
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Auditor's role: e.g. facilitator about purpose or rate of change, or integrating
multiple perspective.
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e.g. how much fund for road maintenance next year? Perspective of finance,
manufacturing, ...
How is information being integrated, on behalf of the audit team?
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Stafford Beer's idea of an operation room.
Evidence:
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Bill Bradshaw and Leonard came up with a list of audit evidence.
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Unconscious:
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Pattern recognition, anomalies
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What has the auditor forgotten?
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Factors and circumstances which increase the likelihood of a misstatement.
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Turbulence or failing business.
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Assumptions:
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How is org working? Use storytelling.
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Completeness -- auditor told everything.
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Going concern -- will be around in 12 months (can use VSM)
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Knowledge of context
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Knowledge of business and industry.
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Evidence in supporting assertions, e.g. financial statement.
Changed view of audit:
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A partnership environment.
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Need social justice, or else there's nothing to audit.
Questions
Any mechanism to hide deceit results in deceit at a higher level.
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This is not so geared towards auditing.
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Need loose controls from management at all levels.
What about the egocentric auditor? Heinz von Foerster: observed system
and the observer. Two types of auditors: one who brings attention at a
meeting and gets everyone fired; and the other who brings about change
before the meeting.
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Auditing as a system of control doesn't have requisite variety, anymore.
Methodist church: self-assessment, since auditing doesn't work in a diverse
group. Have a councillor who engages.
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Caveat: Also valuable to have an outside person, if only to facilitate.
Internal audit: No focus on contacts with customers.
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