| Written by Mark Funkhouser,
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In Rising Tide, a fascinating book about the great Mississippi River flood of 1927, John Barry describes the interconnection of politics and engineering behind attempts, throughout the 19th and early 20th centuries, to control the river. Several different approaches for flood control were hotly debated but the one that prevailed was the “levies only” policy, which dictated the construction of an extensive system of levies along the length of the river, built according to federal standards and largely with federal money. The idea was that as the river was contained within the levy system the current speed would increase which would deepen the channel and increase the volume of water the river could carry without flooding. This was an attractive idea because it meant that fertile delta land could be used by plantation owners to increase their wealth. However, as it turns out, the scouring action does not happen and the silt in contained floodwater fills the channel since it is not allowed to flow out over the land. Over the course of time the levies had to be built higher and higher and when they ultimately failed, the consequences were catastrophic.
In the early 20th century Henry Ford had the idea of the assembly line for the construction of automobiles. Through the use of the moving conveyor belt and interchangeable parts he revolutionized industry and built an empire for himself that survives today. Similarly revolutionary ideas in business and industry, such as the personal computer and the Internet browser, are well known.
In an interesting essay in the August 2001 issue of Internal Auditor entitled “The Value of Adversity” Jonathan Black argues for an adversarial model of audit. Comparing auditing to the judicial process and comparing the internal auditor’s role to that of a prosecutor, he makes the case that the structure of the adversarial process actually serves senior management better than an audit process built on “cooperative relationships” between auditors and their management “partners.”
The common theme in each of these completely disparate observations is that the actions or proposed actions were based on a theory. Theories have consequences, sometimes profound and far-reaching consequences, for better or for worse. The theory that guided public policy with regards to the Mississippi River was wrong and was ultimately proven so by events. Ford’s theory about how to build cars was largely correct, and profitable. In the case of Black’s theory about what sort of audit approach works best, it remains to be seen, although I suspect that he is more right than wrong.
Webster defines theory as: the analysis of a set of facts in their relation to one another; a belief, policy, or procedure proposed or followed as the basis of action; the general or abstract principles of a body of fact, a science, or an art; and a plausible or scientifically acceptable general principle or body of principles offered to explain phenomena. While I have often been criticized for being too theoretical, these sound like good things for auditors to do – analyze facts, act on the basis of beliefs and seek to understand and explain phenomena that we encounter. (Sometimes it seems to me that a good practical idea is one that can be used to make $5 tomorrow and a good theoretical idea is one that can be used to make $5,000,000 over the next five years.)
In most of the writing about auditing, the theories are latent – implied but rarely stated explicitly. One of the few auditors to address theory directly is Frans Leeuw. In Can Governments Learn?, he and his coauthors link the concept of organizational learning to audit and evaluation. Using the concepts of singleloop and double-loop learning developed by the psychologist Chris Argyris, they attempt to understand how audit and evaluation can contribute to organizational learning. Their work is interesting and illuminating for auditors, particularly as they show how learning relates to conflict. Argyris’ theory of organizational learning holds that “double-loop” is associated with much greater improvement in outcomes than “single-loop” learning but is invariably associated with conflict because “double-loop” learning only occurs when basic assumptions within the organization are challenged.
Our discussions of important issues related to auditing, about which many of us feel passionately, would be more productive if the theories were more explicit. Theories explain, predict and influence action. Theories can be broken into researchable questions and research can lead to better theories, more knowledge, better training and ultimately better audit practice. Action guided by explicit theory will be more coherent and congruent – and thus more effective – than action without explicit theory.
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Funkhouser on Auditing