How to Write Effective Audit Observations: The Principles for Bullet Proofing Your Audit Findings

The key to writing an effective audit observation is having a comprehensive structured process. The Institute of Internal Auditors recommends a process known as the 5Cs:

• Criteria
• Condition
• Cause
• Consequences (Effect)
• Corrective Action (Recommendation)

As you develop conclusions, findings, and recommendations, you must present them to your client in a logical, complete, and objective way. This process provides an easy way to consistently develop and present your observations. The components of this process include all the information you will need to inform and persuade.
 
Developing this process can be an important tool for completing and reporting observations in a timely and comprehensive way. It allows you to present those findings to your reader in a logical, complete, and objective manner and, thus, enhances the chances of the client’s buy-in and their agreement to your recommendations.
 
This process can also serve as a basis for review by supervisors and managers. It is supported by your work papers and gives complete and clear details of your analysis and the basis for your findings.

This webinar will provide the basic principles for writing effective audit observations. The audit observations represent the result of weeks of reviews, analyses, interviews, and discussions. It is used to provide important information to management on the area you reviewed. And, more importantly, it provides details to management on significant issues that need to be addressed. How well you communicate that information is critical to getting management’s acceptance of your findings and their agreement with your recommendations. Ultimately, this demonstrates the value you add to the company and enhances your chances for promotions and greater salary increases. After completing this program, participants will be able to understand the five components of an effective audit observation:

• Criteria (Standard used for comparison of area under review).
• Condition (What is being done).
• Cause (Reason that the Condition is not consistent with the Criteria).
• Consequence (Risks if not corrected).
• Corrective Actions (Action needed to correct the problem).

Review of the following recommended observation standards in detail:

• Criteria (Standard used for comparison of area under review).
• Condition (Current status used in the comparison).
• Cause (Reason that the Condition does not meet the Criteria).
• Consequence (Risk if not corrected).
• Corrective Actions (Actions needed to manage the risk).

Examples for each component will be additionally covered.

Audit observation is the most important part of an audit report. It represents the end result of weeks of reviews, analyses, interviews, and discussions. It is used to bring significant issues to their attention that need to be addressed. How well you communicate that information is critical to influencing the readers and getting the results you are seeking. A well-written audit observation will capture the readers’ attention and focus them on the important issues in the report that need to be addressed. A well-written audit observation adds value to your clients by providing:

• Concise, understandable, and persuasive observations
• Actionable recommendations

• Chief Audit Executives
• Audit Directors
• Audit Supervisors
• Audit Managers
• Staff Auditors
• Government Auditors
• Compliance Auditors
• Internal Control Specialists
• Public Accountants
• Accounting Analysts
• Business Analysts
• Quality Control Specialists

Jonnie Keith has been in auditing for over 50 years. He retired in 2012 as the Assistant General Manager (AGM) of Internal Audit with the Metropolitan Atlanta Rapid Transit Authority (MARTA) in Atlanta, Ga. He served in that capacity for over 10 years and was responsible for administering the overall audit activities. In this position, he was also responsible for the review and approval of all internal audit correspondence including audit reports, executive summaries, internal and external correspondence, etc.

Prior to that, he worked at MARTA as the Operational Audit Manager and Senior Contract Compliance Auditor. He also worked at Norfolk Southern Railway (formerly Southern Railway) as a senior operational auditor and started his career at the Federal Reserve Bank of Atlanta as a bank examiner.

Jonnie Keith received a BA degree in Economics from Clark Atlanta University (formerly Clark College). His certifications include:

• Certified Internal Auditor (CIA)
• Certified Fraud Examiner (CFE)
• Certified Government Auditing Professional (CGAP)
• Certified Internal Control Auditor (CICA)

He has been a volunteer seminar instructor for the National Office of the Institute of Internal Auditors for several years.