Effective supervision and leadership is crucial in conducting efficient audits. Yet many auditors are clueless when it comes to the supervisory principles that impact efficiency. Yes, there is a serious shortage of auditors who excel in this area. Too many professionals at all levels ignore the valuable advice that you're about to receive. The result? Inefficient audits. Lower staff morale. Lousy client service. Questionable audit quality.

This is a difficult topic because most people like to believe they are good supervisors. But, shouldn't we be asking the folks who work for them? If you do, you're likely to find differences in opinion. Sure, a few auditors lead and supervise in a splendid manner; unfortunately, most are mired in mediocrity or are downright pathetic. You did say to be blunt, right?

Well, today's your lucky day. You're about to learn the best practices of audit supervision based on Audit Watch's up-close observation of auditors from coast to coast. But remember, the key is to evaluate yourself in an objective manner. We'll even give you tips on how to go about it. Only you can do it, though. So take this time to critique yourself and then set goals for the future.

Best Practice #1: Establish Core Beliefs
A supervisor must convince his/her underlings that efficiency is critical to the audit team's success. Why? Because it's extremely difficult to deliver superior client service, perform high quality testwork, and provide a challenging and motivational work environment without efficiency playing a major role. The best supervisors make sure everybody on the team fully understands this fact.

In addition to this general attitude, efficient auditors hold core beliefs about how audits should be performed. Here is a sample:

• Staff should always be prepared to defend why certain procedures were performed. "We did it last year" is not acceptable. They should also be able to explain why different procedures were not performed.
• Analytical reviews are often more effective and efficient than detailed testing.
• It is usually better to write a review note requiring that more testwork be done rather than a review note saying that too much work was already done.
• Critical areas must be addressed early in the audit.

Such core beliefs are instrumental in running efficient audits. Why? Supervisors can't watch over the staff at all times. Yet staffers often make on-the-spot decision without the luxury of guidance. If they understand the supervisor's core beliefs, they'll have a much greater likelihood of making the proper decisions (and, hence, reduce future review notes).

Best Practice #2: Give Detailed Instructions
Core beliefs are not a substitute for detailed instructions. Time is frequently wasted because instructions are vague and unclear. A leading business executive says "15 to 20 percent of any industry's costs come from error, recovery from error, and cleaning up mistakes." If true (and it probably is,) this is staggering! What more motivation do you need to do the job right the first time? Not only will efficiency increase, but frustration resulting from "spinning wheels" and redoing work will diminish. So, make sure your staff understand exactly what they are supposed to to (unless, of course, you're relying on them to tell you what needs to be done).

The best supervisors also provide input on how long the tasks should take to complete. If an in-charge auditor is told that an assignment should take eight hours, he/she will have a better feeling for whether the right amount of work is being done. If the budget doesn't seem reasonable, maybe there was a misunderstanding.

Best Practice #3: Help Prioritize Tasks
Good supervisors make sure their staffers are prioritizing tasks properly. Some things must be tackled before others to produce high efficiency and client service.

Here's a simple example: Robin Williams, staff auditor at a nightclub called The Birdcage, has the following items on his daily "to-do" list:

• Obtain information for debt footnote
• Clear review notes
• Test fixed assets additions
• Pick up boyfriend's dress at the cleaners

What should be done first, second, third? It depends. For example, if a manager is planning to review workpapers this afternoon, then clearing review notes may the top priority. On the other hand, perhaps the review notes are minor, and we need the footnote information to finish the report that must be delivered to senior management tomorrow.

Or maybe the controller is in a hurry to tell senior management what net income will be for 1995. Last year, the auditors found maintenance costs which were incorrectly capitalized. So, maybe fixed asset additions should be tested first?

In the real world, most staffers aren't always thinking about these factors. In fact, they may not even be aware of these considerations. This is why good supervisors take an active role in ensuring that staffers are working on the right areas.

Best Practice #4: Explain the "Why"
The best supervisors do more than simply give detailed instructions. They explain why the procedures are necessary. Unfortunately, a lot of senior audit professionals (those who should know better) don't truly understand the rationale. Let's face it-too many auditors operate on a autopilot, repeating last year's procedures (or the ones done on last week's audit).

In other cases, supervisors claim they are too busy to instruct the staff. Come on folks. Help them out! "What's the big deal," someone might respond, "as long as the staffers do what they're told!" Well, an AuditWatch client summarized it this way: "We must ensure staff understand 'why' procedures are being performed. Without this, they will not be able to propose alternative, more efficient procedures. I think that right now a fairly large percentage of staff members have been trained more in the 'how' than in the 'why'." How true!

What must you do? First, make sure your staff understand the big picture. It's amazing how many in-charge auditors must look up the amount for sales or net income when asked ("Sales are about, uh, five million or so. But hold on, let me check the financial statements...Oh, sales are actually 24 million.")

Your staff must also understand the risks on the audit. Good supervisors take the time to communicate this information during formal planning sessions, phonecalls, lunch, wherever. Quiz your staff, if necessary.

In exchange for this valuable information, staff persons must be prepared to think and propose new ideas. In fact, the best supervisors demand that their staffs suggest new approaches. Essentially, this is empowerment. For those of you reading only SFAS's or romance novels, empowerment is a big thing in corporate America. It basically means giving employees more responsibility and say in how their work is done. Auditors can't do this, however, unless they understand the big picture and risks.

One word of caution. While employees should be encouraged to suggest new and creative approaches, in most cases, these ideas should be approved by a superior before proceeding.

Best Practice #5: Monitor Progress
The best supervisors usually keep close tabs on how their audits are progressing. This means ensuring that the critical audit areas and issues are addressed first. This means reviewing budgets and asking probing questions to make sure everyone is still on track. This means being accessible for questions. This means reviewing workpapers in a timely manner so that review points can be cleared before fieldwork ends.

Sure, there can be exceptions to all of those best practices when a different approach makes sense. In this case, if you have ample confidence in a subordinate (based on past experience), it's okay to ease off and devote your time to areas where it's more sorely needed. Always use your good judgement.

Best Practice #6: Improve the Work Environment
Sometimes auditing stinks. Well, it does! You gotta do lousy tasks. Or the conference room isn't big enough. A tight deadline is stressful. Nevertheless, the best supervisors always try to make work more enjoyable and stimulating.

These leaders realize that auditors don't have to be so dreadfully serious all the time. They may play practical jokes. They sing the melodies to popular tunes while reviewing workpapers. They smile. They try to keep thing light. No, it's not always possible...but many times it is.

These auditors are also filled with empathy. They really try to view the world from other person's perspectives. They remember what it's like to be a staff auditor. For example, even though they lack a social life, they don't expect the staff to work late on a Friday night.

Nor do they think, "I paid my dues, so this is the way it's gonna be." The world had changed. Actually, it really hasn't. The audit profession has been losing talented people for decades because of antiquated management styles. How about writing down the names of two people that you really enjoyed working for? Jot down some reasons why you selected them. Do you behave in a similar manner?

Best Practice #7: Promote Accountability
The best supervisors always give feedback. Sincere praise, suggestions for improvement. Too many people are afraid of hurting someone's feelings or not being universally loved if they offer constructive criticism. Big mistake. It's the only way your staff will grow and learn and become more effective. By withholding such advice, you're sentencing them to mediocrity.

Sure it's easier to ignore some topics, sweeping them under the table. Your advice may not be welcomed. But, when presented properly, most staffers are appreciative and may blossom like never before.

Performance evaluations, a natural forum for such communication, are a great way to change or reinforce behavior. Therefore, at the end of most audits, the best supervisors are giving written or verbal evaluations regardless of the department policy. Actually, however, they usually don't wait until then. Feedback is provided verbally and via review notes on a continuous basis.

Think about your childhood for a moment. Who were the teachers and coaches who got the most out of you? Were they candid about your strengths and shortfalls? Did they volunteer to help work on your weakness? Grab the pencil again and fill in the blanks.

Summary
Poor supervision is commonplace in the world of auditing and continues to create all kinds of problems. The profession has lost boatloads of talented people. Efficiency has been severely crippled. Quality and client service have been sacrificed. Decide today that you're going to be different. You're going to improve these essential skills. You'll be more effective in everything you do.