This is the Fish Story about the three phases of audit.
In 1993, the "AGA Task Force Report on Performance Auditing" appeared in the Government Accountants Journal. The task force was chaired by Jim Nobles, Legislative Auditor for the State of Minnesota and included, among others Jay Fountain of GASB, Harry Hatry of the Urban Institute and our own Jerry Silva, City Auditor of San Jose. Their report represents a milestone in the development of performance auditing. Among the questions that the report addresses are, "How should performance auditing be defined?" The current definition of performance auditing in the government auditing standards is basically the result of their work.
Another significant question the report addresses is, "What is 'success' in performance auditing, and what are the elements necessary to achieve it?" The task force concluded that there were two principal elements to a successful performance audit.
First, to be successful, a performance audit should be designed to address the questions and issues that decision-makers care about. Second, its results must be directly and effectively communicated to decision-makers, and the message must have an impact.
While auditors had for some time talked about "adding value" as a goal of the audit process, this was the first time the profession definitively stated that for an audit to be truly successful, something had to happen as a result of it. This is a controversial step because it says that the auditor should be judged by an outcome that he or she can only partially influence. Like most program managers, we resist attempts to hold us accountable for outcomes resulting from our work. The task force recognized these difficulties, but nevertheless stepped forward and made the correct call: "..after all of these and other limitations are recognized, we come back to the view that performance auditors should aim for impact."
The Fish Story is one way of thinking about audit impact and how to achieve it. You are all familiar, I'm sure, with the three phases of audit: planning, fieldwork, and report writing. Some of you are doubtless familiar with the three phases of fishing as well.
First find a fish.
Essentially here, we are talking about audit selection. Performance audits, unlike financial audits, cannot be conducted on a regular audit cycle. The audit universe is too large, the auditable elements too diverse and the costs of audits too high. Traditional risk assessment, as used in internal auditing, is a place to start, but it is not adequate to maximize audit impact because it does not adequately consider opportunities to improve outcomes. The Australian National Audit Office calls its approach a "risk-based value-added" approach. At minimum, we need to consider that risk is significantly different from a performance audit perspective than it is from a financial audit perspective. The Australians write that audit objectives should be conditioned by the net benefits expected from the audit. Translated, that means it's better to fish for bigger fish, or at least the biggest fish that you think you can actually catch.
Then hook the fish.
This means conducting a good audit and writing a report that clearly and convincingly conveys what you found and what needs to be done, by whom, to achieve substantial improvement in the issue under consideration. The AGA taskforce report addresses this issue as follows: "To enhance the possibility for impact and success, we think performance auditors should pay attention to three key elements. We will call them: audit scope, work quality, and report communication."
They go on to elaborate these points but in essence the point is to do very careful fact- finding and analysis about facets of the issue that people care about and report the results clearly. Along those same lines, for example, Lawrence Sawyer talked about the importance of "flawless" reports. In addition to being free from errors of any kind, I find it helpful to consider this model, adapted from the work of Stan Stenersen of GAO: start with data and then move successively to information, understanding, message, and impact.
Finally, get the fish in the boat.
This means to work diligently and tenaciously after the report is issued to get the recommendations implemented. Auditors must realize that there is a continuum of post-audit activity that they can engage in to maximize the impact of their audit work. This continuum ranges from work that is well within the established conventions of the profession, such as follow-up audits, tracking recommendation implementation and reporting the results of audits, to work that is controversial and seen by some as beyond the role of audit and perhaps impairing the independence of the auditor, such as advising management, advocating for policy changes and in-depth discussion of issues with the media. The AGA report encourages auditors to monitor the impact of their work and to attempt to gain insights into factors that influence the utilization of reports, but seems to frown on auditors working to have recommendations implemented. They point out that implementation of recommendations can sometimes cause conflict with "important constituents" or other objectives of government decision-makers and warn auditors that "...while audit reports can have a significant 'political' impact, we think it is extremely important that auditors not seek to become 'players' in the political process."
You may not seek to be political, but if your audits are well done, address major issues, and your recommendations get implemented, then your work will have impact, and you will be seen as political. But you are political in a different sense. You are not the executive administering programs or the legislator voting on laws. Your influence depends on the slender reed of logic and analysis. You try to catch big fish with a light line. If you do your work well, it nurtures genuine politics. And as political philosopher Jean Bethke Elshtain has written, "If genuine politics ceases to exist, what rushes in to take its place is pervasive force, coercion, and manipulation."
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Funkhouser on Auditing