Auditing What Matters

Sharon Erickson, San Jose City Auditor

Contact info: sharon.erickson@sanjoseca.gov

(408) 535-1238

“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

Why audit?

Auditing What Matters

The role of the auditor

Auditing What Matters

“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

Selecting audit subjects that matter

Auditing What Matters

• Important, relevant, timely

• The first of many decision points• Annual citywide risk assessment• Role of suggestions and organizational knowledge

EXAMPLES:Employee health benefits

Pension sustainabilityTake home vehicles

Animal servicesStreet maintenance

Decision points every day

Auditing What Matters

• Choices in direction• Audit selection• Audit scope and objectives

• Allocating resources (staff and time)• Prioritizing• Testing• Extending testing

• Interpreting results• Reporting results

Deciding what’s important

Auditing What Matters

Important =consequential, significant,

far-reaching, critical, crucial, pivotal,

momentous, serious, grave, urgent,

substantial, weighty, valuable, relevant,

influential

A question of judgment

Auditing What Matters

• Importance of independence, objectivity, and due professional care • Balanced• Realistic• Open-minded, objective evaluation

• Experience diagnosing problems

• Little details; big picture

• Tough, but fair

Gauging significance

Auditing What Matters

• Looking for patterns

• Frequency

• Significance

• Materiality

• Risk

EXAMPLES:Pension Sustainability

Retirement TravelAirport Concessions

Audits that challenge existing policy

Auditing What Matters

• 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 ReformHealth Benefits

Police CivilianizationTeam San Jose

Audits that are relevant and timely

Auditing What Matters

• Role of the auditor• Aware of your surroundings• Upcoming issues facing your jurisdiction• Responsive

EXAMPLES:Recovery Act

Cardroom LicensingTake-home Vehicles

Importance of audit planning

Auditing What Matters

• 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

Thinking critically

Auditing What Matters

• Evaluating evidence• Professional skepticism• Attitude

Accepting – Open-minded – Overly criticalOptimistic – Realistic – Pessimistic

Disinterested – Curious – Suspicious• Hard work• Pulling the thread• Questioning attitude• No coasting

Thinking strategically

Auditing What Matters

• 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

Formulating audit conclusions that matter

Auditing What Matters

• 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

Writing audit reports that matter

Auditing What Matters

• 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

Recommendations that matter

Auditing What Matters

• 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

SUMMARY

Auditing What Matters

• 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