To audit or not to audit

For weeks we had prepared frantically. We were incredibly eager to ensure making a great impression. We worked hard to bring everything to near-perfection. Our pride, being convinced we were generally doing a good job, was mixed with apprehension, out of fear to fail the test. On D-Day, we were all dressed up, groomed, assembled in the boardroom early. Amused, I noticed three out of seven colleagues had a fresh haircut. Admittedly, I had also taken extra care to look my best. We were all nervous, but ready to face scrutiny. This was an extremely important audit for us, carried out by people close to the highest person in charge, who was about to make an important decision for the future of our location.

At 9 am the auditors casually walked in, joking among each other, giddy about getting out of their normal meeting room environment. They reminded me of a school class on a field trip. The contrast with our seriousness and apprehensive tension couldn’t have been bigger.

It went well, very well. We had answers to all their questions. Sometimes we even surprised them by giving interesting additional information they hadn’t thought to ask. We backed each other up, had a cooperative interaction, and laughed together; coming across as a well-oiled team. At the end of the day, the auditors praised us, within a week followed by a very nice, positive report submitted to the CEO.

I agreed with the outcome. We had been working hard for years to make important improvements. We did work fairly well together as a team. And our polished presentation was based on solid facts and results. Without doubt, we deserved that positive report.

Still, the process emphasized to me that audits can have random outcomes. The actual performance is often less important than the perception people manage to create. I’ve experienced cases where a smooth presentation hid structural flaws, and an undeserved positive audit report was given. But also cases where good people in a good organization came across as underperforming, because they rather spent time on their actual work instead of taking weeks to prep for a group of visitors happy to have their semi-annual trip abroad. The resulting critical audit report can unfairly damage the reputation of that particular part of the organization for years.

Audits seldom give a fully realistic picture. Nonetheless, they seem immensely popular. In addition to mandatory external audits, many organizations carry out internal audits. Sometimes these are more or less mandatory as well, because external bodies (like the government, trade or industry associations) request internal checks. Other internal audit structures aim to ensure the organization follows its own rules, or whether existing situations are still in line with changed requirements. In itself, audits can be useful for certain purposes. However, as with most organizational concepts, the devil is in the execution details.

I am convinced many audits do not give an answer to the question. Sometimes because an audit wasn’t the right tool, sometimes because an audit is not carried out well. When considering an audit (structure), first ask the following questions:

  1. Why an audit? What is the purpose, what does the organization want to achieve? Is an audit really the best way?
  2. What is the desired result an audit (structure) should provide? Do you want to have a general overview? Or do you want to deep dive in one or more area’s?
  3. What is the time and effort justified? How long should the audit take? A few hours, days or even weeks? How much do you want people to prepare? Not just the auditors, but also the people who are audited. Estimate the time needed for everyone involved. Is the cost really worth it?
  4. Who are the best people to do the audit? For example, in case you need subject matter experts, make sure you rotate them from their normal jobs, or appoint them for a maximum of three years. After being out of their field for more than a few years, they are not subject matter experts anymore. Or maybe you need peers to audit their colleagues? If so, how do you ensure they aren’t too mild (“they will audit us in a few months from now, so let’s be reasonable”), nor too harsh (for they will experience backlash from their own colleagues). Or do you want a permanent internal audit organization? If so, where should it reside in the organizational chart? How do you embed an audit structure politically in the organization? For example to minimize the political power fights that will inevitably happen?
  5. What is the best form of this particular audit? You can only audit what you see or hear. For example, if you don’t do 1-on-1 interviews, you will never know what individual people think (because in a group they will adjust their answer). If you want to know how certain managers are doing, ask several people around them (their bosses, subordinates, peers). Equally important, don’t only rely on results and numbers, as they can be skewed and won’t show the real underlying issues.
  6. What should the status of the internal audit structure be? Can they give a final verdict, or do they have an advisory role? Do the auditees have to agree with the report? Or can they attach their response to it? Or is the report completely independent of the auditees opinion?

These are the most important questions to answer before carrying out an audit. If one or more of the above items can’t be addressed properly, there’s a high chance an audit won’t give the desired outcome. In that case, ditch the idea of an audit and find another way to achieve the purpose the audit was meant for.