Powerful Audit Report Writing
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The document discusses best practices for writing powerful internal audit reports. It emphasizes the importance of clear and concise communication through the use of plain language and visual aids. It provides tips for different sections of an audit report including the executive summary, findings, conclusions, and recommendations. The document also outlines dos and don'ts for effective report writing such as following the five C's framework, emphasizing potential improvements, and obtaining stakeholder feedback.
Powerful Audit Report Writing
- 1. Powerful Internal Audit Report Writing Sana Baqai Vice-President - IIA India, Delhi Branch 9th August IIA India
- 2. Understand the importance of clear and concise communication Learn about the 5 C's of internal audit report writing Understand tips for writing effective internal audit reports O b j e c t i v e s Identify the different sections of an internal audit report Best Practices, do’s and don’t for writing the powerful internal audit reports 01 02 03 04 05
- 3. Ask yourself these questions F o o d f o r T h o u g h t Were all your findings or recommendations different from last time this area was reviewed? 01 Do your reports focus on the future rather than the past? 02 Was the audit opinion a true reflection of the overall conclusions? 03 Did the findings, conclusions, and recommendations really represent the key issues? 04 Were all your recommendations 100% practical? Have more than 90% of your audit recommendations during the last year been fully and successfully implemented? 06 05
- 4. C l e a r a n d C o n c i s e C o m m u n i c a t i o n To effectively communicate, we must realise that we are all different in the way we perceive the world and use this understanding as a guide to our communication with others. - Tony Robbins
- 5. Stake holders HOD CFO/ CEO/ MD Audit Committee Statutory Auditor Regulator / Investor Process Owner W h o a r e t h e S t a k e h o l d e r s
- 6. Process Owner HOD / CFO / CEO / COO / MD ▪ Process understanding ▪ Genuine observations ▪ Listen to their point of view ▪ Practical suggestions / recommendations ▪ Cost-effective solution ▪ Overall risk assessment ▪ Categorization based on risk ▪ Summarized findings ▪ Root cause analysis ▪ Recommendations ▪ Process owner’s acceptance, agreed action plan, first- person ▪ responsible for implementation and target date ▪ Value addition Audit Committee Statutory Auditor ▪ Overall coverage and risk assessment ▪ Statutory non-compliances ▪ The Summarized finding of key issues ▪ Preventive controls / automated controls ▪ Management comments, agreed action plan, first- person responsible for implementation and target date ▪ Providing assurance / comment on improvement ▪ Value addition ▪ Overall coverage ▪ Issues which affects the true and fair view of the accounts/ financial reporting ▪ Statutory non-compliances ▪ Assurance which they can rely on ▪ Comfort which would help them make a proper assessment and save their time W h a t A r e T h e S t a k e h o l d e r s E x p e c t a t i o n s
- 7. Process Owner HOD CFO/ CEO/ MD/ ACM Statutory Auditor • The internal audit report • Discussion on observations at exit meeting and prima facie reply • Discussion of queries during audit • The draft internal audit report • Detailed annexures • Executive summary • Dashboard presentation • Final Internal audit report • Detailed audit report with annexures providing instances D i f f e r e n t F o r m O f C o m m u n i c a t i o n
- 8. A wonderful serenity has taken possession of my entire soul, like these sweet mornings of spring which I enjoy with my whole heart. I am alone. 27 /04 Image placeholder A wonderful serenity has taken possession of my entire soul, like these sweet mornings of spring which I enjoy with my whole heart. I am alone. 27 /04 Image placeholder W h a t T h e S t a k e h o l d e r s L i k e s T o S e e • Revenue / Costs / Savings • Efficiency improvement (Rework, Complaints, Rejections, Returns, Inspections, Discounts, etc.) • Supply chain / procurement • Benchmarking • Analytics / Dashboard reporting Value-Adding Processes • Fraud scenarios • Late adjustments • Related parties • Exceptions • Journal entries • New transactions / regions / products • Whistleblowing events • Delays • Continuing control deficiencies Fraud Risks • Comprehensive compliance tracking and monitoring • Self-assessments • Independent reviews • Compliance history and assessments • Board certifications Compliances
- 10. What readers do and don’t value in your written reports? Why recipients don’t always grasp the significance of issues you present? How you can make it easy for readers to understand and accept your key points? How word choice can affect the readers’ response to your report? H a v e y o u t h o u g h t ?
- 11. Criteria Condition Cause Consequence 1 2 3 4 What it Should be What is the standard that was not met? The standard may be a company policy or other benchmark. The Current State R e m e m b e r t h e F i v e C ’ s Corrective Action 5 The Reason for the Difference Effect Plans/ Recommendations What is the particular problem identified? Why did the problem occur? What is the risk/negative outcome (or opportunity foregone) because of the finding? What should management do about the finding? What have they agreed to do and by when?
- 12. D i f f e r e n t S e c t i o n s o f A u d i t R e p o r t Executive Summary Introduction Finding 01 02 03 Conclusions Recommendations 04 05
- 13. A u d i t R e p o r t S t r u c t u r e Contents of Internal Audit Report could include: The report content and structure is tailored to meet client requirements and intended audience, as long as these requirements do not violate local risk management or professional practice requirements. Cover Page • Type of audit • Name of the Organisation • Period Covered • Date of Submission • Author of report Table of Contents • Identify Topics and Page numbers • Report Sections • Annexures / Attachments Purpose, Scope and Methodology • Information about the audit • Why audit was done: o Per Long Range Audit Plan o Requested by the department o Required by law o Other • How it was done: o Audit objectives o Audit methodology o Audit scope Executive Summary Brief summary of key observations in a concise and easily readable format: • Overall conclusion • Overall recommendation • Relate to Purpose and Scope Audit Observations • Background • Description of the issue noted • Cause • Effect / Implication • Recommendation • Department comment Appendices/ Annexure Details supporting the observations
- 14. Use Plain Language Use of appropriate and plain language avoids ambiguity. Avoid Jargons Technical terms may be used wherever necessary. Be Specific Don't just state that there is a problem. Explain the problem in detail, including the criteria, condition, cause, consequence, and corrective action. Use visuals to improve readability Tables, charts, and graphs can help to break up text and make your report more visually appealing T i p s f o r W r i t i n g E f f e c t i v e I n t e r n a l A u d i t R e p o r t s Tailor the report to the specific audience Consider the needs and interests of your audience when writing your report. What information do they need to know? What level of detail is appropriate? Get feedback from stakeholders Once you have drafted your report, get feedback from stakeholders to make sure that it is clear, concise, and effective.
- 15. Failed Inadequate Found Ineffective E l i m i n a t e T h e s e F i v e W o r d s F r o m Y o u r R e p o r t s Appears
- 16. 1. State the Critical Issue First Clients, senior executives, and audit committee members want a succinct description of the issue, its level of risk, and the recommended mitigating or corrective actions. 4. Graphical Representation 2. Illustrate the Risk B e s t P r a c t i c e s - F o r P r e s e n t a t i o n 3. Emphasize Potential for Improvement • Identify the best way to represent your data –bar charts, pie charts, scatter diagrams. • Follow robust statistical procedures to back up your audit conclusions. 5. Tabular Representation Audit reports need to communicate the severity of risk in a way that clients can easily grasp. If the stated issue could lead to decreased revenues, for example, the report should quantify the potential loss in a rupee. Identify the best way to group and distribute your data logically into a tabular format to improve the comprehension of complex data with several fields. Internal audit is not just about finding problems, but also about finding potential for improvement.
- 17. 1. Positive Assurance Do not report by exception only. Give a balance view by including in report what is working properly. 4. Short Reports 2. Follow the 5Cs B e s t P r a c t i c e s 100% 3. Corrective Action Keep it short and focused on areas that matters. 5. Faster Reports Follow 5Cs it will help you in defending your observations. Time is the essence. Issue the report speedily for quick actions. Work with process owners to include corrective and preventive actions.
- 18. ✓ Factual accuracy ✓ Check language - Check your grammar, spelling, punctuation and style. ✓ Consider the importance of the report: who it is for, why they want it, how will they use it? ✓ Observe the following principle –Brevity / Clarity / Readability / Consistency. ✓ Importance: Decide what information is important and what is irrelevant. ✓ Visual Presentation: Decide where you might need illustrations or diagrams. ✓ Use bullet points to make your points clearer. ✓ Use the K.I.S.S principle: Keep It Short and Simple ✓ Conciseness: Omit any information, phrases and words that are not absolutely necessary ✓ Clarity and Consistency: Check your style and opinion (for, against or neutral) is the same throughout. ✓ Simplicity ✓ Clear, unambiguous writing ✓ Good logical flow ✓ Helpful headings: Include sub-heading wherever required. ✓ Correct formatting: Justify the content for uniform look throughout ✓ Lack of repetition and unnecessary words ✓ Review your report D o ’ s & D o n ’ t o f R e p o r t W r i t i n g
- 19. D o ’ s & D o n ’ t o f R e p o r t W r i t i n g × Gender, sexual preferences, etc. - Using ‘he/ she’ × First reference to individuals: Jaya informed us that… (designation preferred) × Superlatives (best possible solution would be…) × Unsupported words / findings × Using colloquial language: For e.g., use “performs” instead of “does”, “requires” instead of “needs” etc. × Jargon: Not everyone understands jargon. So translate their technical language for non- auditors × Unconventional words: Use simple, commonly used words × Overstuffing sentences: Keep sentences short & discrete, so don’t put too many ideas into one sentence × Negative language: Negative language stands to dissuade rather than convince clients × Judgmental sentences: The essence of observation is lost by including personal opinions / judgment