When I designed my Negotiation Skills for Auditors workshop six years ago, I contacted Heads of Audit (HoA) in my network to ask the question: Does Internal Audit negotiate? Answers ranged from “of course we do” to “no way in hell do we negotiate!”. That HoA was almost angry with me for asking the question.
The truth is, auditors have to successfully overcome two major communication challenges to finalize their audits: Maximize cooperation AND navigate between their position and the position of their audit clients on audit findings and recommendations.
So do you negotiate findings and recommendations? Or do you reconcile them? Or do you haggle as if you are at the Grand Bazaar, starting high and meeting in the middle?
I don’t mind the word ‘negotiate’ for auditors, and I appreciate ‘reconcile’ even more. Haggle? Not so much.
What I’ve heard in most of my workshops across the years is that a lot of audit teams feel pressured by their audit clients to:
- lower the risk rating on findings,
- describe favorable context or excuses why the condition and cause are what they are, and
- change the wording in some cases to less provocative or less sensitive language.
Should you or shouldn’t you?
It’s entirely possible for Audit to do any or all of the three points mentioned above. But it’s risky business. Do I recommend it? Nope, with one exception. Here’s why:
- If Audit lowers the risk rating on a finding without evidence to support it, Audit is at risk of not conveying the true severity of the finding to senior management. So what? Well, every HoA I speak to says the Board wants to know about risk. If risk is not clearly described and assessed, the issue may not receive sufficient management attention to mitigate the risk in a timely manner. This could ultimately result in (continued) inefficiencies and realization of exposure which could impact the profitability and reputation of the company.
- Ideally Audit has presented the evidence and sufficient context around the issues to enable every stakeholder reading the report to understand and agree to the risk and recommendations. If the audit client provides more supporting information prior to the release of the report, then Audit should be open to amending the content of the report … if the new information sheds light and adds value. Audit report findings are not the appropriate place for excuses and attempts to defend actions taken or not taken.
- Modifying the wording within findings can be a way to facilitate agreement as long as the changes do not diminish or change the underlying main messages regarding facts and risk. That said, I don’t support changes where there is undue pressure on Audit. This sometimes happens when there is a policy of getting full agreement on all findings before a report is issued. The longer there is no agreement, the more pressure there can be on Audit to give in to undesired wording changes.
(And yes, in practice, allowances are occasionally made to adjust a risk rating or include ‘extra’ information from the audit client’s perspective. This happens for reasons rather not described here. These should be exceptions and in collaboration with Audit management.)
When is it okay to ‘negotiate’?
It’s always okay to have an open discussion with audit clients to make sure all of the facts, figures and evidence have been presented and are understood. Remaining fair and objective is key. Being a business partner rather than acting as the company’s police force is also important.
When Audit works with their audit clients to make value-added recommendations that make sense in light of the current environment, business objectives and risk, the result is ‘more’ for all involved:
more cooperation, more agreement and more added value. This translates to better audit results, better risk management, and ultimately, cost-savings, productivity and profitability.
Wishing you much success as you agree your findings and recommendations with your audit clients!
All the best,
PS: Learn more here about our Negotiation Skills for Auditors training course. You’ll learn our proven strategies and techniques to increase cooperation and prevent conflict so discussions over findings and recommendations are quick and easy.
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