Auditing What Matters
Sharon Erickson, San Jose City Auditor
Contact info:
sharon.erickson@sanjoseca.gov
(408) 535-1238
Why audit?
“Legislators, government officials, and the public need
to know whether (1) government manages public
resources and uses its authority properly and in
compliance with laws and regulations; (2) government
programs are achieving their objectives and desired
outcomes; (3) government services are provided
effectively, efficiently, economically, ethically, and
equitably; and (4) government managers are held
accountable for their use of public resources.”
– Government Auditing Standards
Auditing What Matters
The role of the auditor
“Auditing is essential to government accountability
to the public.”
– Government Auditing Standards
• Responsibility to the public
• Asking uncomfortable questions
• Are we just testing controls OR are we providing
independent, objective assessment of performance
Auditing What Matters
Selecting audit subjects that matter
• Important, relevant, timely
• The first of many decision points
• Annual citywide risk assessment
• Role of suggestions and organizational knowledge
EXAMPLES:
Employee health benefits
Pension sustainability
Take home vehicles
Animal services
Street maintenance
Auditing What Matters
Decision points every day
• Choices in direction
• Audit selection
• Audit scope and objectives
• Allocating resources (staff and time)
• Prioritizing
• Testing
• Extending testing
• Interpreting results
• Reporting results
Auditing What Matters
Deciding what’s important
Important =
consequential, significant,
far-reaching, critical,
crucial, pivotal,
momentous, serious,
grave, urgent,
substantial, weighty,
valuable, relevant,
influential
Auditing What Matters
A question of judgment
• Importance of independence, objectivity, and
due professional care
• Balanced
• Realistic
• Open-minded, objective evaluation
• Experience diagnosing problems
• Little details; big picture
• Tough, but fair
Auditing What Matters
Gauging significance
• Looking for patterns
• Frequency
• Significance
• Materiality
• Risk
EXAMPLES:
Pension Sustainability
Retirement Travel
Airport Concessions
Auditing What Matters
Audits that challenge existing policy
• Selecting audit subjects that matter
• Have you asked why?
• Do you stop once you’ve audited to the current
policy?
• The next logical inference
• A question of judgment
EXAMPLES:
Pension Reform
Health Benefits
Police Civilianization
Team San Jose
Auditing What Matters
Audits that are relevant and timely
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Role of the auditor
Aware of your surroundings
Upcoming issues facing your jurisdiction
Responsive
EXAMPLES:
Recovery Act
Cardroom Licensing
Take-home Vehicles
Auditing What Matters
Importance of audit planning
• Start with broad overview
• Preliminary survey
• Risk assessment
• Professional skepticism
• Significance
• Deciding the type and extent of audit work
• Sufficient and appropriate audit evidence
• Audit risk
EXAMPLE:
Health Benefits
Auditing What Matters
Thinking critically
• Evaluating evidence
• Professional skepticism
• Attitude
Accepting – Open-minded – Overly critical
Optimistic – Realistic – Pessimistic
Disinterested – Curious – Suspicious
• Hard work
• Pulling the thread
• Questioning attitude
• No coasting
Auditing What Matters
Thinking strategically
• Selecting audit subjects that matter
• What interests you?
• What piece seems most important?
• Why?
• Being aware of your surroundings
• Changing environment
• Timing
• What will be deemed relevant and actionable?
• A question of judgment
Auditing What Matters
Formulating audit conclusions that matter
• Allowing sufficient time to interpret results
• Distilling the main idea
• Balancing details and big picture
• Not just that the writing process takes too long
• Thinking critically about the overall/combined result
• Assessing materiality and impact
• Relevant and actionable recommendations
EXAMPLE:
Animal Services
Auditing What Matters
Writing audit reports that matter
• Focus on what’s important
• Use definite, specific, concrete language
• Clear, persuasive conclusions
• Clear, actionable recommendations  Impact
• Avoiding confusion
• Use of graphics
• Whose story is it?
• Placing yourself in the background
• Avoid overwriting or overstating conclusions
Auditing What Matters
Recommendations that matter
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Actionable
Impact service delivery
Will this recommendation make a difference?
Talk to people on the front line
• Quantifying audit benefits
• Calling out recommendations with potential budget
impacts
• Relentless follow-up
EXAMPLES:
Pension Sustainability (SRBR)
Police Civilianization $5.1 million
Auditing What Matters
SUMMARY
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Select audit subjects that matter
Decision points every day
A question of judgment
Gauging significance
Thinking critically
Thinking strategically
Formulating audit conclusions that matter
Writing audit reports that matter
Recommendations that matter
Auditing What Matters