What Is In The Background Statement?

Audit reports often include background statements or sections. But because the audit standards don’t address the content of background statements, audit teams often don’t know what to put in them! Hence, I receive questions like this one:

Should you include a background statement? What’s in it?

Hi Leita,

Jesse and I are preparing our brief for the team about our Audit Reporting Clinic last week. (ROI for training dollars!). We want to sell to the CAE and our work leads that our standard audit report format could be improved. 

We found ourselves with a question that we don’t know the answer to. Why do you/ should you include background in the report at all? And, how deep should the background information be?

We also reviewed my last (also my first) audit report. It was painful, but Jesse was a real champ at giving me feedback (and he didn’t use red ink!) We both really enjoyed your class. We are bubbling with ideas and annoying the heck out of our colleagues.

Awaiting your wisdom as we attempt to communicate vertically, horizontally, laterally, and diagonally.

Leita’s Answer:

I am glad you guys enjoyed it! And I am so glad you are excited about approaching your audit reports in a new way!

Background statements are not mandatory per the audit standards, so there are no rules about whether you should include one or what the content should be.

Most auditors believe the background statement is designed to help give readers context. But many of our key audit report readers don’t need it at all because they are already acquainted with the subject matter. For that reason, I think it should go in an appendix (or in the BACKground – get it? BACKground?) of the report. That way, the majority of your readers don’t get hung up in a bunch of text they don’t need and can get straight to the good stuff.

If that makes you uneasy and you want to alert to reader to it’s existence, in a small box or space near the front of the report, you can pose the question, “Want to know more regarding the size, purpose, and funding source of this program? See page X.”

The background could answer a few key questions for the reader and, to make it easy to read, these questions could do double duty as subtitles:

• What is the purpose of the program?
• What is the scope/size of the program? How many people does it serve? How much money is spent?
• How is this program funded?
• What is changing about the program? Any interesting threats/developments?
• Why did we choose this program for audit?
• Maybe… just maybe… the history of this program. But hesitate to include this as that is almost always guaranteed to bore a reader…
• Other info the reader should know…. Again, posed as a question.

I am just doing that off the top of my head, you realize. 🙂

But what I do know from experience, is that auditors spend wayyy too much time crafting this section because the audit standards are silent and audit leaders are unclear about what they want included in the background statement. So, if you decide to create a background statement, I highly recommend setting a policy or a standard for what should be included.

Let me know what your CAE says.

Leita

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