In this episode of THE SAMPLE, Leita Hart-Fanta, CPA discusses how to fight the bureaucracy.
Welcome to The Sample, a quick discussion of auditing concepts and terms that will help you do your work. Conducting an audit in accordance with auditing standards is no small feat and I want to support you. We’ll be referring to the GAO, IIA and AICPA literature to bolster our conversations. Let’s get started.
In this episode, we talk about how to fight the bureaucracy. Oftentimes, auditors are blamed for bureaucracy, and we’re not the bad guys. The bad guys tangle us up in red tape, so we can’t move and we can’t get what we need. We can’t get to the airplane because we have to get through the airline security and TSA. And the Austin-Bergstrom International Airport is recommending that you get to the airport three hours in advance of your flight. That’s really fun when you have a 6:00 AM flight, right?
Or maybe you want to hire somebody, add someone to your team. But the process of hiring someone is so onerous, you just shrug your shoulders and say, “Oh, forget it. We’ll just do it ourselves.”
So bureaucracy keeps you from getting done what you need to get done. What’s weird is auditors get blamed for it, and I think we kind-of get tricked into building bureaucracy. Instead we should fight the bureaucracy. And I want to talk about that.
A simple story of how to fight the bureaucracy
I followed up on an audit after an auditor named Pam, who was auditing a small court that only employed about five people. For some reason, she decided to look at petty cash, and the word “petty” there is key. She decided to audit petty cash and decided that their controls over the 20 bucks they had in petty cash were not adequate, so she recommended that three people, out of the five, sign off on petty cash transactions.
Now she kind of got tricked into it, because when I followed up, I had a few questions. First of all, why were we even auditing an entity that was only five people big, when we had all kinds of places we could have been looking around in the state? Maybe we could have looked at welfare programs. Maybe we could have looked at educational programs. Maybe we could have looked at the foster care program, or building roads. There were so many things we could have looked at, but we were looking at these little tiny courts. And then why on earth did she pick petty cash?
My job at that point was to tell the director, “I’m sorry, we went off on a tangent here. You do not need three signatures on your petty cash transactions.” Good old Pam was set up to create more bureaucracy; she couldn’t help it, almost. Some of it’s due to the way we talk about our work — we talk in half-truths, and we have to be really careful what we say. And we have to be really careful with our intention.
Half-truth #1: Everywhere I look something is broken
Two half-truths I want to address: One is everywhere I look, something is broken and I need to fix it. So the first one, everywhere I look, something is broken. It’s true. Something is broken everywhere you look. <laughing> I’m always thinking of the Wizard of Oz when I think about auditors. On the facade, it’s a powerful sorcerer, but behind the curtain, there’s this poor little guy pulling levers, trying to make things work. <laughing> The closer you look, the more likely it is you’re going to see something. I argue that everything in its essence is broken. But the problem is, we’ve got to be careful in what we’re looking at.
So if you look at petty cash, you’re going to find a problem in petty cash, and you’re going to layer on controls. Should you be looking at petty cash? No.
Should you be looking at the safety of bridges? Yes. Should you be looking at office supplies? No.
So, you’ve got to focus. And the way you focus is you do a risk assessment and choose something interesting to look at.
I don’t think Pam did that, or she would not have looked at petty cash. And, then you stay within scope. You do not allow your project to veer off into uninteresting areas, because then you’re going to have to recommend additional controls.
Half-truth #2: I need to fix it
That gets me to my second half-truth here, which is, I need to fix it. Right? True. What you’re looking at may need to be fixed, maybe. But it’s not true that you, the auditor, have to fix it.
Think about this approach with a client because the client, the auditee, is the one that should be implementing the solution. Here’s an approach you might want to take: You’re looking at something interesting, and you see a problem, and you say, “We see this problem, blah, blah, blah. Here’s a problem.” Then you ask the client, “Do you think this is a problem?” And hopefully they say, “Yes.”
And then you say, “Do you think something should be done about it?” And hopefully they say, “Yes.” And then you say, “Well, what do you think should be done about it? What do you think?” Then they come up with their own solution.
You know, that auditee has a choice of what to do with risks; it’s not our choice. This is from the Green Book in the COSO model. They can accept a risk. They can just go, well, you know? Yeah. We’re not controlling petty cash very well, but okay it’s not a big deal. We’re just going to let it ride.
That’s perfectly valid. You should not control things that don’t matter. Y
ou could avoid the risk, which is eventually what this court decided to do. We’re just going to get rid of petty cash so we never hear from you people again. And I’m like, I’m sorry, you didn’t have to do that, but okay. I can understand why you just avoid the whole conversation.
You can reduce risk by layering on additional controls. That’s what Pam decided to do, which is silly in this case, or you share the risk; you make someone else responsible for the item. That probably wouldn’t work in the case of petty cash.
Not every risk deserves layers of controls. Controls over stupid things is how we get bureaucracy. So do we have to — one military organization I worked for, for a while — they had 25 controls over the use of a purchasing card. <laughing> So I was like 25. Really? <laughing> So why do you have a purchasing card? A purchasing card’s supposed to make purchases easier. You’ve just made it really hard. So why even give these things out?
Don’t fall for it
Don’t fall for these tricks, these mental half-truth things. Don’t fall for it. Look at only important stuff. Let the client resolve their own problems and allow them to say, “You know what? I don’t even think this deserves controls.” And then you go, “Yeah, you’re right. It really doesn’t deserve additional controls.”
Another thing I want to ask you to do, though, is to approach your work holistically and not in silos, which means that you’re only concerned about your little world and your little area, your issue. You have to think about what the end user’s experience is like.
Obviously, no one has thought about what our experience is like as travelers at the airport. No one’s done a comprehensive look at what happens to a traveler.
So, you have a superpower as an auditor. You know how to work with processes. You’ve probably studied Lean Six Sigma, TQM, reengineering techniques. There are all kinds of names for it, but essentially you take a holistic view of a system and then you eliminate the bureaucracy and the wasteful steps and the frustrating parts with the end user in mind, or the end product in mind.
So think of your work holistically. That way, you can be a hero. You can free people up from the bureaucracy (fight the bureaucracy!) and allow them to do what they need to do.
Would you like to learn a little bit more about how to fight the bureaucracy and earn some CPE at the same time? I recommend something regarding internal controls. We have several books – one on internal controls, one on Lean Six Sigma and a video on fraud, which talks a little bit about controls. And then a video on the Green Book. You can also get several products bundled together. And, several times a year, I run an internal controls workshop, a two-day webinar. And of course I can come in and visit you in person, which I would love to.
That wraps it up for another episode of The Sample. True to the nature of a sample, we didn’t talk about everything, so you’ve probably got questions. Write to me firstname.lastname@example.org and I’ll do my best to fill in the blanks. Thanks for playing.
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