Positive Auditing: More Than a Shift in Approach
By Mikhail Ben Rabah, CIA, CFE, CRMA
Government Audit Manager, Presidency of the Government, Tunisia.
How many of you have seen in their career, audit reports highlighting upside risks (opportunities) and confirming what is working within corporate governance, risk management and control processes? I bet few, very few of you.
For decades, as auditors, we have been focusing in our work on downside risks, organizational weaknesses and management failures. Imagine for a moment you were a manager and despite all your endeavors and good will to do things right, auditors have always found something wrong about your work and never said a word in their reports about what you have done in the best interest of your organization. Although their observations and recommendation may have been useful and helpful in developing your work, you will have kept some sorrow in your heart, won’t you? Admit that in the long run, it’s deemed discouraging and even frustrating.
Although identifying organizational failures and weaknesses is the core of our work, it is never all of our work. Indeed, limiting audit scope to downside risks and issues requiring improvements could be considered in modern auditing as making a biased or flawed judgment about the organization governance and management processes. It is like “telling the truth but not the whole truth”.
Hopefully, current worldwide auditing standards such as the IPPF and recent publications in the audit field, are encouraging auditors whether internal or external to get more involved in what we call positive auditing and balanced engagement reporting.
Why Positive Auditing?
In addition to reasons mentioned above, positive auditing provides:
- A broad range of audit assurance services by building up a systematic process of identifying upside factors — organizational strengths and opportunities — in support of achieving organizational objectives. During all audit engagement planning phases – determining objectives, scope, preliminary risk assessment, audit procedures- auditors should consider screening what management do the best and what should carry out the maximum value for the organization.
Including positive findings in audit reports should not be an option but an integrated part of the reporting process. Hence, positive auditing is more than a shift in auditing approach or an alternative methodology. It is in the core of the systematic, disciplined approach to audit any organization.
- A better satisfaction of stakeholders’ expectations who may be asking for information and opinion about organizational strengths and opportunities much more than weaknesses and management failures. Positive auditing demonstrates a better auditors’ understanding of the organization context and the current and future challenges.
- A more objective audit opinion and more fairness in evaluating due diligence of management in pursuit of organizational performance.
Indeed, positive auditing has also its origin in positive psychology which seeks a balanced and a more complete view of human behavior and suggests that we also must explore people’s strengths along with their weaknesses.
How to do Positive Auditing?
- By establishing a more complete risk-based audit planning with a systematic consideration of upside risks and organizational strengths.
- By considering evaluating organizational and management performance against objective and fair criteria. It is not weird or inappropriate if auditors recommend that management should be rewarded or have a fairer compensation when they definitely deserve it.
- By including significant positive findings and success stories in audit reports.
Basil Orsini a recently retired internal auditor from the Government of Canada in Ottawa, has been one of the fervent advocates of positive auditing. If you are interested, you may read his recent article entitled “ The Upside of Risk” published in the Internal Auditor Magazine
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