How to Stop the BS

In this episode of THE SAMPLE, Leita Hart-Fanta, CPA defines BS in audit reports and reminds auditors to backup their writing with testing and evidence.

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.

Transcript

In this episode, we discuss how to stop the BS.

What is BS?

Saying something that sounds plausible, but isn’t backed up with evidence.

Now that is not like an auditor at all. Auditors back up what we say with evidence. That’s one of the strengths of our profession. We can be trusted to tell the truth.

And when I run into certain words in an audit report, in audit documentation, I know that the auditor is not backing up what they’re saying with testing or with evidence.

Words that indicate BS

Here are some examples:

If I see “In general…” or “Approximately…”, I know that the auditor didn’t do the research or didn’t do a test. It’d be better if we would quantify our testing results.

If an auditor said “It appears that…” “It is possible…” “It could be…” “It might be…”, obviously, they’re BSing. Instead, the results should demonstrate the results of a test or evidence indicates this. This is classic auditor BS. Stop the BS!

I see this a lot in effect statements in a finding. Errors and irregularities could go undetected. Well, were there any errors and irregularities? Did you check to see if there were any errors or irregularities? That’s the question I want answered.

Or, the auditor says, “The client said…” or “The CFO said…” and this is one of their causes in the finding. That means that the auditor is relying on testimonial evidence, which inherently is BS, because people just kind of make things up in the moment. That’s the definition of BS!

We cannot rely on that for our audit reports. So instead, you should find out if there’s any documentary or physical evidence to back up those assertions.

And this one, “Internal controls are weak.” This says absolutely nothing. This says nothing! What internal control are you talking about? Be specific. Such as, “Managers did not review 8 out of 12 reports before they were submitted.”

Try not to use those mean words like ‘weak’ or ‘insufficient’ or ‘inadequate’ or ‘poor,’ because again, that’s a clue that you’re talking BS. Instead, say something like, “Only 54% of data is valid.” That lets you know it’s ‘insufficient’ or ‘inadequate’ or ‘poor.’

Quantify, quantify, quantify.

Stop the BS, guys. Don’t make it in your audit reports!

Here’s a list of words again that you want to avoid (Generally/In general, Approximately, Appears, Possible, Could be/Might be, Stated/Said/Asserted, Internal controls, Inadequate/Insufficient.) Instead, back up what you’re saying with evidence, research and testing.

Want to know more?

Would you like to learn a little bit more about this topic and earn some CPE at the same time? I suggest a video course called Choosing the Best Audit Test Plus Audit Documentation. It’s about 2.5 hours and we talk about statements that can or should be backed up with evidence.

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 at leita@yellowbook-cpe.com and I’ll do my best to fill in the blanks. Thanks for playing.