Auditors often say that the tone at the top of an organization trickles down to every level of the business. Is your company’s work environment ethical and open? If not, corporate culture assessments can help prevent and detect unethical and criminal behaviors. But, to cover all the bases, your external auditors generally must work closely with people inside your organization.
Here’s how you can facilitate this critical part of the audit process.
1. Identify a senior executive to act as liaison Corporate culture is a key element of an auditor’s overall risk assessment — but auditing corporate culture is a new concept for most organizations. Assign a senior executive to act as liaison with the audit team to ensure that company insiders cooperate. This executive should understand how the audit process works and have the authority to resolve any issues that employees or executives may cause during audit fieldwork.
2. Verify the audit team’s expertise Do audit team members have prior experience auditing corporate culture? Ask the engagement partner to provide biographies for audit team members, detailing their experience performing corporate culture audits and conducting investigative interviews of company insiders. Interviews can help identify potential weak spots that require extra attention during audit fieldwork. For example, if management downplays the need to comply with government rules and regulations, the audit team is likely to dedicate extra resources toward the company’s compliance efforts.
3. Allow auditors to survey all employees and executives Auditing corporate culture requires a company-wide assessment of the prevailing mindset. Auditors must survey a broad sample of employees — not just people conveniently located at corporate headquarters or executives in the C-suite. Before the auditor sends out surveys, it’s OK for your executive liaison to review the questions to minimize ambiguity, leading questions or offensive inquiries. He or she also can help the audit team identify key employees and executives to interview.
4. Provide access to human resource data The audit team should have full access to personnel records. Examples of relevant data include: Employee turnover rates, Discipline records, Annual performance reviews, Merit-based bonus schedules, and Exit interview findings. In addition, if your organization has established a whistleblower hotline, the audit team should have access to data on the number, type and severity of tips the hotline has received over the last year.
5. Make improvement efforts based on previous findings Previous internal and external audit reports can help identify cultural risks. In addition to reviewing prior reports for control failures, auditors will evaluate how your management team responded to prior findings. If no cultural improvements were made based on last year’s recommendations, it doesn’t bode well for the current year’s corporate culture assessment. Healthy cultures promote honest reporting Corporate culture audits are an emerging area of expertise, and reported findings come in a variety of lengths and formats. Our auditors understand how to help you use these findings to minimize cultural risks and enhance the reliability of your financial reporting. © 2018
About this Author
Karly leads the audit team in providing services to a variety of for-profit and not-for-profit organizations including charter schools subject to Government Auditing Standards, employee benefit plans, broker/dealers, trusts, and construction entities.