Importance of effective auditor-stakeholder relationships

Have you ever felt the tension in the room when someone mentions the word 'audit'? Yeah, I know. It’s not a surprise. There is an uncomfortable vibe associated with auditing, especially for those on the receiving end. 

But should it be this way? I don’t think so. You see, as an internal auditor for many years, I have come to realize that the trick to a smooth auditing process lies in the quality of the relationship between the auditor and stakeholders. Let me share my thoughts.

Who are the Stakeholders?

Now, before we delve into the importance of having a good auditor-stakeholder relationship, let's first get a clear picture of who these stakeholders are.

They include practically everyone in an organization - from the board of directors and top-level management to staff at operational levels. Even the auditors themselves! But why is it so crucial to have a good relationship with these people?

Trust is not a given

First off, let's talk about trust. We all know trust isn’t given; it's earned. In my experience, the difference between an audit process that feels like a battle and one that feels like a productive collaboration often boils down to trust. 

Trust between auditors and stakeholders can encourage open communication, honest responses, and a willingness to take on board constructive criticism. Trust is like a bridge that connects the auditor and the stakeholder, allowing for a smooth flow of communication, ideas, and information.

Boldness to tackle the unknown

A good auditor-stakeholder relationship also paves the way for better understanding. As auditors, we often walk into departments that are not our areas of expertise. 

Having a positive relationship with stakeholders means they're more likely to help us understand their functions, processes, and challenges. This, in turn, results in a more thorough, accurate audit. 

Mind what you say

But it's not just about getting stakeholders to talk to us. It's about how we talk to them. Effective communication is a two-way street.

An auditor who takes time to explain the audit process, the purpose of the audit, and how it can benefit the organization can transform the perception of an audit from a dreaded event into an opportunity for improvement.

Mutual respect and understanding helps

And then there's the matter of improvement and change. Let's face it, nobody likes to hear that they're doing something wrong. But that's part of an auditor's job, right?

To point out the weaknesses and recommend improvements. Here's where a good relationship comes in. If there is mutual respect and understanding between the auditor and stakeholders, the recommendations are more likely to be accepted and implemented. The result? Better processes, higher efficiency, and improved overall performance of the organization.

You need to be people centric.

Now, you might be wondering, 'Okay, this all sounds great, but how do I build these relationships?' Well, that's the million-dollar question! In my experience, it starts with respect and empathy. You need to be people centric.

That is, you need to understand that all the members of the organisation, including you, are connected and are working together to achieve a common goal.

You must remember, we're dealing with people, not just processes and systems. Show genuine interest in their work, listen to their concerns, and empathize with their challenges. 

Also, make sure to keep the lines of communication open. Share your findings in a constructive manner.

Use simple, clear language. And don’t forget to engage in active feedback, encouraging questions and suggestions. This helps to clear up any misunderstandings and builds a stronger rapport.

Lastly, be professional. Carry out your duties with integrity, objectivity, and fairness. Nothing erodes trust faster than perceived bias or inconsistency. Note this well!

Good relationship case study

Let's consider an example of a flourishing auditor-stakeholder relationship. In a multinational manufacturing company, the internal audit team, under the leadership of its chief auditor, Esi Maud, established a strong rapport with the different stakeholders of the company. One specific case that stands out involved a comprehensive audit of the company's supply chain processes.

Esi Maud and her team ensured they thoroughly understood the business and supply chain process. They engaged with the supply chain management team, taking the time to listen to their challenges and concerns.

Esi Maud then explained the audit objectives clearly, ensuring they understood that the primary aim was not to find fault but to identify areas for improvement.

During the audit, the team found significant discrepancies in inventory management. They presented these findings to the supply chain management team. The presentation was clear, succinct, and empathetic. 

They used visual aids to illustrate the inventory discrepancies and their potential impact on the business. Esi Maud reinforced that the aim was to streamline the process, reducing costs and improving efficiency. 

As a result of this effective communication, the supply chain management team embraced the audit findings and took immediate steps to rectify the issues.

This was a clear demonstration of how an effective communication strategy can foster a positive relationship and facilitate effective audits.

Bad relationship case study

Conversely, a negative relationship between auditors and stakeholders can hinder the audit process. Let's look at the example of a large software development company.

The company hired a new chief auditor, Crozy, who was tasked with auditing their software development process. Crozy had a strong background in auditing but lacked the soft skills necessary for effective communication.

From the outset, Crozy's approach to the audit was seen as aggressive and confrontational by the software team.

He made no attempt to understand the unique challenges the software team faced, and his communication was filled with jargon and technical terms that were not clear to the team. 

When Crozy's team found compliance issues in the software development process, he presented these findings to the software team in a way that came across as accusatory rather than constructive. '

There was no empathy in his communication, and he did not consider the perspective of the software team. 

This caused significant defensiveness, and the software team contested the audit findings, leading to a standstill in the audit process.

This example highlights how a lack of effective communication can harm the auditor-stakeholder relationship, ultimately impeding the audit process. 

Wrap up

Let me wrap up with this thought: in auditing, it's easy to focus on the numbers, the procedures, the regulations. And while these are undoubtedly important, let's not forget the human element.

The relationships we build with stakeholders can significantly impact our work as auditors. It can be the difference between a gruelling, contentious audit and a collaborative, constructive one.

So, let's build those bridges, folks! Trust me, it will make your life as an auditor a whole lot easier.

Until next time, keep auditing!

The writer is an independent Internal Audit Advisor, Enterprise Risk Management Consultant, and professional trainer.

He is the founder and Chief Operating Officer of Redric Consulting, your trusted partner for comprehensive training and consulting services in the fields of Governance, Risk, and Compliance (GRC). 

With a proven record of accomplishment in Internal Audit, Internal Control, Compliance, Fraud Risk Management, and Cybersecurity, Redric Consulting empowers your organization and ensures its success.

You may reach out to Frederick on fpaikins@redricconsulting.com