Changing NAOF: Can a Supreme Audit Institution assume a consultative role in audit work?

A consultative approach in auditing has been a recurrent theme in discussions at the National Audit Office of Finland (NAOF) following the NAOF's new strategy and the resulting reorganisation. The idea is that the auditor should have a dialogue with the customer during an audit. This makes it more important for auditors to pay attention to maintaining their independence.

One of the goals of the NAOF’s new strategy is customer-centric products and services We want to serve our central government customers with a forward-looking and development-focused approach. In addition, our products, such as our audit reports and other information we produce, should be clear and accessible through different channels.

At the NAOF, the most important elements of customer focus are stakeholder cooperation, communications, service thinking, and customer understanding. Customer understanding, in turn, is based on good interaction. This generated the idea of a consultative approach, which will be increasingly important in future audit work.

We noticed that there was a lot of discussion within the NAOF about what the consultative approach means in concrete terms in audit work. We wanted to have an opportunity to discuss this in greater depth together, and thus we ended up organising an internal training session on this theme.

There should be an open dialogue between the auditor and the auditee

One of the issues the participants in the training session highlighted was the need for interaction skills in different kinds of customer encounters in audit work. Interaction skills promote cooperation with the auditee, i.e. the customer, which in turn makes it easier to obtain information.

The consultative approach is more or less involved in the entire audit and is shown primarily as interaction. It is important to keep in mind that interaction is a two-way process – it always requires at least two participants. It was also pointed out at the training session that it is essential to inform the customer agencies and their management about the NAOF’s consultative approach.

As an audit proceeds, the auditor should tell the customer about the targets of the audit, the practices, and the preliminary results.  Openness usually makes the customer more willing to cooperate, while also making it easier to obtain information and creating a receptive atmosphere.

Another issue discussed during the training day was when an auditor’s consultative approach becomes consulting, which jeopardises the auditor’s independence.

An auditor can, for example, give advice and instructions related to the general principles of accounting and financial statements, but an auditor does not prepare the audited entity’s accounting or make individual entries. However, in such cases an auditor can – and should – advise the organisation and guide it in the right direction.

It is always the management of the customer organisation that decides and is responsible for whether the auditor’s instructions are followed. There is unfortunately no clear-cut distinction between the consultative approach and consulting. It is up to the auditor to give this careful consideration.

Even in an audit a human meets another human

In the era of digitalisation, it is important for us auditors to continue traditional meetings with the auditees. Face-to-face dialogue should not – and must not – be fully replaced by digital encounters.

At the beginning of the summer, the NAOF gathered feedback from the top management and the financial and administrative management of accounting offices about communications in financial audits. The results were very good. Our customers were satisfied, for example, with how we had informed them about the audit contents and process, and with their cooperation and dialogue with the auditor.

However, we should not dwell on the good results for too long. Organisations change, legislation is amended, and digitalisation continues to advance at a fast pace. The NAOF is involved in this change together with the audited entities.

Let’s conclude by going back to the NAOF’s strategy. We have promised to cooperate and have a dialogue with our stakeholders on different levels of organisation. By listening to the various actors and discussing with them, we will achieve a comprehensive understanding of the challenges, risks and opportunities involved in central government finances and their management.

This promise provides an excellent basis for continuing audit work with a consultative approach.