We spoke to some internal auditors, and here are some of the major challenges they face:
Non-cooperation from the management and employees
If the organization you audit does not understand the importance and scope of the audit and does not provide you enough information, then it becomes difficult for you to complete the audit processes.
Make clear what the expectations are. Agreeing the terms of audit engagements is one of the requirements. It ensures a clear understanding and communication of the auditor’s responsibilities and the duties of the management. As an auditor, you need to make your organization understand that you intend to identify risks and then help them make a remediation plan.
Hear what the leadership team and staff have to say. You need to understand what is working for them and what is not, and what do they want to improve in the organization. Ultimately, you need to suggest improvements to help them get what they want. Once you get their cooperation, they will share the evidence and data you need!
Failure to define the scope of the audit
If you fail to define the audit scope, there are chances that audit conversations can spill outside the scope, and the audit can become vague. At the same time, if you find some critical findings during the audit, it’s worth mentioning and exploring, even if it’s beyond your audit work scope. The internal controls implemented to be compliant with standards like PCI DSS, NIST, GDPR, and SOX could be your primary focus.
The auditors’ responsibility lies in finding out whether the defined requirements are met. Instead of looking for whom to accuse, the focus should on on remediation. However, it does not undermine that the auditor has to let go of finding on blatant fraud. The auditor as well as the management is responsible if a fraud is ignored unless proven otherwise. It may arise due to management override of internal controls. The auditor has to set aside all assumptions and apply professional skepticism when carrying out their audit. The appropriateness of journal entries will ensure that there are less chances of collusion. Segregation of duties should be in place. Any inappropriate or unusual activity should be flagged. Any provision or accounting estimates should be thoroughly checked for fraudulent intentions and biases. Hence, a retrospective review of management judgments and assumptions related to significant accounting estimates is important.
This article has tried to highlight major challenges that an auditor faces. The auditor’s primary goal is to make the organization better. A good review process by the audit firm may also flag any additional areas as deficiencies in the process. Thus, ensuring robust internal controls and timely compliance shall help the company to emerge victorious in such scenarios. VComply is a robust compliance and audit management software that helps auditors analyze and report on audit findings.