Which auditing standard does your audit team follow? IIA, GAGAS, AICPA, PCAOB or something else?
Is your loyalty to one particular auditing standard blinding you to the helpfulness and strengths of the others?
It is my habit to send my course materials to all of my clients a few weeks in advance so they have time to make copies for the participants. Usually clients look over them and don’t say much about what they see. This year, one of my clients combed over the materials and then asked me to take out any references to the AICPA’s auditing standard. She reminded me that her shop is subject to the Yellow Book and that her team conducts performance audits in state government.
I knew that, but I resisted her request. I argued that I should leave the AICPA references in because they are relevant to her shop.
Why? Four main, interrelated reasons:
1. All auditing standards are simply an accumulation of best practices that wise auditors have adopted as standardized behavior or rules.
I saw an original version of the GAO’s Yellow Book late last year (I think it was originally published in the 70’s). And man, was it thin! It was poorly written and horribly vague–much like my early writings (I certainly hope no one is hanging on to those!)
When I first started working with the Yellow Book in the late 80s, it was a brilliant tome compared with the AICPA auditing standards. Currently, the AICPA has surpassed the Yellow Book in many key areas, including fraud and risk assessment.
So all auditing standards are constantly evolving because the brainiac-muckity-mucks who sit on the standard setting committees contribute new ideas to make things better every time the standards are revised (as a matter of fact, the IIA came out with an amazing guide on audit objectives in 2017 all auditors should use!)
2. Standard setting bodies influence each other
As you can imagine, the auditing standard setters are all watching each other to see who has their act together regarding a certain topic. So when one standard setter moves, the others move, too.
The relationship between the AICPA and the GAO is especially tight because their sphere of influence overlaps. They meet with each other to sync up their standards on a regular basis.
And although the IIA and the PCAOB technically don’t play well with other standard bodies, both still strive to improve the standards each time they revise (which often means borrowing from the AICPA and the GAO!).
3. An audit is an audit is an audit.
I have the opportunity to work with all sorts of auditors – auditors in government, CPA firms, corporate internal auditors, you name it – and what I know for sure (yes, I am stealing that line from Oprah!) is that an audit is an audit is an audit. Every auditor goes through the same basic process. The audit subject matter will differ and the criteria will differ, but everyone is going down the same paths.
It is no use acting like the ‘other auditors’ are way different than us. They are not.
4. Audit professionals should seek to find out who has the best guidance and follow that, not simply follow mandatory rules.
Lastly, I think professionals shouldn’t be ‘rule followers’ but seek the best for themselves and their clients. Don’t get frustrated when you deal with people who say things like, “That’s not my job,” “No one makes me do that,” and “I don’t want to do that, so there!”.
Imagine going to a doctor and telling her that you have a serious condition. Then she turns her back to you, types your symptoms in a computer and then repeats instructions for a standard treatment she found off WebMD. That is what she was trained to do, that is what she is comfortable with, and she is sticking to it!
But wouldn’t you rather she use her powerful brain and all of her resources to figure out several alternatives for you and then recommend the absolute best treatment and care she is aware of? Wouldn’t you rather she look to several different experts for answers?
Now, I am not equating auditors to doctors, but we are both professionals. And to me, being a professional means that you are aware of more, share more, and seek to learn more. More more more, all the time time time!
Professionals are always seeking to improve, and they aren’t resistant to innovation. They aren’t stuck on any particular audit standard and they will take what they need to get the job done from wherever they can find it.
At least browse all of the auditing standards
So, although the AICPA isn’t ‘technically’ required for many auditors, I think they are worth keeping an eye on, as are all of the other auditing standard setting bodies.
If you want to browse the audit standards yourself – to discern their similarities and differences – check these sites out:
- GAO Yellow Book Standards
- IIA International Professional Practices Framework
- AICPA Clarified Auditing Standards
- PCAOB Standards
- International Standards on Auditing
I am, as you can tell by the title of my company (!), particularly fond of the Yellow Book. To learn more about that standard, check out these resources.