Being an Awesome Auditor!

1. Being an Awesome Auditor! And an Incredible Investigator Phil Wilson, CPA, CFE, CCEP

2. What’s our goal today? • This is a HIGH (40,000 feet) view of audits and investigations • To teach you how to audit and investigate effectively • To teach managers and directors what to expect • To teach hiring managers what skills to look for • To develop some ideas around how to train new auditors and investigators

3. What are the requirements? • GAAP • GAAS • SAS • IFRS • Green Book • Yellow Book • Red Book • Phone Book • Good Book • Cook Book • Comic Books…the list is endless and often confusing.

4. Keeping it simple… At the end of the day, here’s the critical skill sets that any good auditor or investigator needs. You should be able to: • Go somewhere you’ve never been • Meet with people you’ve never met • Look at things you’ve never seen • Figure out what’s important • Come back and make sense of it all …all while looking, acting and sounding like a professional.

5. Your Mission, should you choose to accept it… • The Assignment • What are we auditing, reviewing or investigating? • Where is it? • Who are the key individuals? • The Objective • What’s the goal? • How will we know if we’ve achieved it? (KPI’s) • How do we eat the elephant? (Areas of focus and testing) • The Constraints • Time • People • Money • Expertise

6. Showing Up: Go somewhere you’ve never been. “Eighty percent of success is showing up.” – Woody Allen “I got tired of waiting for my ship to come in, so I swam out to meet it.” – Jonathan Winters “We are not retreating; we are advancing in another direction.” – Douglas MacArthur “Not all those who wander are lost.” – J.R.R. Tolkien “Arriving late is a way of saying that your own time is more valuable than the time of the person who waited for you.” – Karen Joy Fowler

7. Planning is key • Where are you going? • Is it overnight or across town? • Do you have a place to stay or a base of operations? • Do they know you are coming? Should they?

8. GPS and Google Maps can be your best friend • Always good to have more than one route • Siri sometimes enjoys long scenic drives that go nowhere • Make sure you have the step by step directions • Consult with those that have been there before

9. Find the place beforehand if possible • If you are traveling overnight, drive over the evening before if you can • A description of the location is really helpful • A picture is worth a thousand words; Google Street View is worth even more

10. Show up ON TIME • “You can’t help it” is not an excuse; late is a choice, not a disease • Take traffic and other concerns into account • Punctuality is a sign of respect and professionalism • If you get there early, sit in the car until about ten minutes before the appointment • Have contact info at the ready to call in case something comes up

11. Don’t be this person-

12. Going someplace you’ve never been- The Takeaways • Auditors and investigators - Make an effort to be purposeful about travel and planning. • Managers – Take an objective assessment of your team’s skill sets in this area, providing coaching, mentoring and training where needed. • Hiring Managers – Structure at least a portion of your assessment of a candidate around their ability to plan and travel.

13. Speaking Up: Meet with people you’ve never met. “If you think it’s hard to meet new people, try picking up the wrong golf ball.” – Jack Lemmon “Be so good they can’t ignore you.” – Steve Martin “If people like you, they will listen to you, but if they trust you, they’ll do business with you.” – Zig Ziglar

14. Building Rapport • Know the person’s name and use it • Be friendly if at all possible • Identify an interest of theirs and use it to your advantage • Step away from the electronics • Have a conversational dialogue • Stay away from “hot button” topics like social issues, religion, politics, etc. • A little humor is okay if that’s your thing…just play it safe

15. Using the Perception of Others • A little self deprecation can set others at ease • Be the student, let them be the expert • Work with who you are • Work with who others think you are

16. How to Listen • You were given two ears and one mouth for a reason • Listen to understand, not to respond • Make notes and come back to questions, rather than to interrupt • “Who else can give me information on this subject?” • Work as a team if possible: • It keeps you from getting engrossed in note taking • It gives another perspective • It provides corroborating testimony

17. Asking the Right Questions • Ask Open Questions • Treat the subject of the interview as the Subject Matter Expert • Make it conversational • Ask follow-up questions • Always, always, always give them the opportunity to add anything additional that they believe may be important

18. Interviews vs. Interrogations • An interview should be more conversational; an interrogation is more direct. • An interview uses more open questions; an interrogation tends to be more defined questions. • An interview is typically friendly; an interrogation tends to be more adversarial. • If possible, stay in the interview territory; they tend to produce better results.

19. Meet with people you’ve never met – The Takeaways • Keep your inquiries as conversational as possible • Be as personable as possible • Learn to actively listen • Treat your audit clients like human beings • Managers- consider the skill sets of your employees in these areas when making assignments • Hiring Managers- Try to measure the ability of candidates to engage, build rapport and ask good questions Pro Tip- avoid the “stuck butt” syndrome

20. Looking at things you have never seen “The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.” - Marcel Proust “Man cannot discover new oceans unless he has the courage to lose sight of the shore.” - Andre Gide “One of the advantages of being disorganized is that one is always having surprising discoveries.” - A.A. Milne

21. Doing Your Research • Research the business unit, the types of documentation and data you may need • Build “the ship in the bottle”- make the plan, but don’t become so “married” to it that you are inflexible • Read prior work papers and reports if available • Confer with previously experienced auditors • Reach out to independent subject matter experts

22. Reviewing Information in the Field • As you interview audit clients, make a note to ask for copies of key documentation; more is USUALLY better • Realize that invoices, checks, vouchers, etc. look different in different places and that doesn’t mean they are incorrect • Stop and ask yourself if the documentation tells a complete story- don’t let your imagination fill in something that isn’t there • Make sure your documentation is stored and labeled in such a way that you can identify the source person, date, subject, and any other relevant information ASAP

23. Evidence- Strongest to Weakest • Original Documentation • Copies of Original Documentation • Photos • Written Policies and Procedures • Emails from Audit Client (Person that Performs Duties) • Emails from Audit Client (Management) • Recordings of Interviews • Written Summary of Interview Notes • Personal Narrative

24. Documenting Interviews and Communication • Take good notes! (This is where a partner can help) • Build narratives as soon as possible • Make sure you have name, place, date, position, etc. • Copy pertinent emails, letters, and other communications • Do not fall into the “email string” trap

25. Things you have never seen - The Takeaways • Do research before you get to the field • Be open minded to different appearances of documentation in the field • Collect the strongest evidence you can • Document your interviews and communication • Managers- Train your staff to judge and recognize types of information, steering them toward stronger evidence. • Hiring Managers- Consider testing a candidate’s ability to identify documents, as well as key components, such as dates, signatures, etc.

26. Figure out what’s Important • “Anything less than a conscious commitment to the important is an unconscious commitment to the unimportant.” - Stephen Covey • “It is more important to go slow and gain the lessons you need along the journey then to rush the process and arrive at your destination empty.” - Germany Kent • “Until you find where the goal post is, you shall only exert all your precious energy and ability shooting in the direction of the goal kick without scoring any goal” - Ernest AgyemangYeboah • “Make room for the real important stuff.” - Tigger

27. Figure Out What’s Important • How does this information address the original objective? • Is this information testable? • How does the testing of this information address the KPI’s? • Does this information introduce new and relevant areas previously not a part of the original plan or program?

28. Beware of Scope Creep • An abundance of information can lead you into areas that aren’t a part of your original assignment • Horizontal versus Vertical Scope Creep: • Horizontal Scope Creep spreads into areas that are not part of the original objective; • Vertical Scope Creep digs into the minutiae of testing, that look for issues far beyond the threshold of material or significant risk. • Most of the time, EVERYTHING doesn’t carry the same importance…so don’t pretend it does. If everything is a priority, nothing is a priority.

29. What’s Important - The Takeaways • Make sure that you are collecting information that is relevant to the objective and KPI’s of your assignment • Beware of horizontal and vertical scope creep • Managers- Note the volume of a staff member’s working papers, looking for information that is just “padding”, dilutes the main objective, or wastes time • Hiring Managers- Look for ways to evaluate a candidate’s ability to establish relevance and set priorities.

30. Come Back and Make Sense of it All “The art of communication is the language of leadership.” - James Humes “The most important thing in communication is hearing what isn’t said.” - Peter Drucker “Words, once they are printed, have a life of their own.” - Carol Burnett “Wise men speak because they have something to say; Fools because they have to say something.” - Plato

31. If you do an exit conference… • Let your tone, language, and nonverbal cues convey a sense of collaboration and cooperation • If meeting in person, choose your seat in a way that doesn’t evoke contention • You should have already addressed findings as you have found them- no surprises • Present everything, large and small; even the things you don’t plan to call a finding • Allow management the “win” of making a case against the small areas; this builds consensus • Bear in mind, the object of the game is to get management to acknowledge areas for improvement

32. Preparing your final product • Determine the appropriate format to communicate your final work product (report, letter, memo, oral presentation) • Consider legal and regulatory obligations, as well as the policies of your entity • The final work product should be the “star” on the Christmas Tree; supported by work papers arranged by sections, steps, tests, and supporting documentation, in that order • All significant information, especially findings, should be directly supported by work paper documentation

33. Reports, Letters and Memos • Memos are reserved for brief, “FYI” subjects and internal usage • Letters should be used to officially communicate: to announce an entrance or exit conference, an engagement, or as the cover for a report • Reports should be reserved for official, detailed information and addressed to and written for a broader audience • Good business English, written in layman’s terms to about a sixth grade reading level

34. Oral Presentations • Consider your audience • Over prepare, under perform • The more you do it, the easier it becomes • Keep the main thing the main thing • Power Point is good; but if you aren’t comfortable with the tool, don’t use it • Repetition of key points is helpful • Always give the opportunity for asking questions

35. Written Communications • Consider your audience • Over prepare, under perform • Keep the main thing the main thing • “Telegraph” the tone • Read, re-read, ask someone else to proof at least once, if not more (this should be the bedrock of a good quality improvement program) • Less is more • Judicious use of bold face type and bullet points for emphasis can be helpful

36. Language, Cultural & Educational Challenges • Some readers and some presenters did not grow up with American English as a first language • Avoid jargon, expressions and industry acronyms; explain if needed • Speak and write as simply as possible; do not try to impress others with a plethora of urbane and erudite lexes…fancy talk • Let your review process include a “cold reader” test

37. Make sense of it all- The Takeaways • Find the right format to communicate the final product • Support everything you say • Review, polish and ensure that your communication is clear, concise, and appropriate • Managers- Help staff develop writing skills and give them the opportunity to present to put them at ease; it’s the greatest leadership development skill you can give them • Hiring Managers- If possible, evaluate the written communication skills of a candidate with a writing sample

38. Looking, acting and sounding like a professional… “Dress Appropriately.” – Two word dress code for General Motors, as written by CEO Mary Barra “If you look at any successful professional – a salesperson, a marketer, a real estate agent, a trader – they all have the same qualities as a con man. The only difference is that one side uses their talents in the right direction and the con man is taking the easy way out.” – Frank Abagnale Jr.

39. Questions? Phil Wilson, CPA, CFE, CCEP Phil.wilson@tn.gov