Speaker: Audit Interviews Cannot Be Mere Formality

By:
Chris Gaetano
Published Date:
Jun 13, 2017
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Salvatore A. Collemi, a CPA with extensive audit experience, said that auditors need to strengthen their soft skills, particularly when it comes to conducting interviews during the audit. Speaking to an audience at the FAE's Forensic Accounting and Litigation Services Conference on May 23, he shared tips and tricks for interviews, drawn from his years as a regulator, standard-setter and external auditor. 

Before the interview even begins, he said, it's vital to understand what the auditor is trying to accomplish through it. Is it to confirm something? To gather information? To clarify a point of confusion? Without a clear objective, the interview can become muddled, possibly ending in frustration for both sides. He also emphasized the importance of understanding the client's industry, as too many auditors take a one-size-fits-all approach to clients. 

"Whether commercial entities or financial services or governments or nonprofits, you've got to understand their business, and a lot of external auditors consistently are not aware of their client's industry. A lot of auditors are great at knowing financial reporting and auditing, but how can you audit an industry you don't understand?" he said. 

He also highly recommended against conducting the interview over the phone. Collemi said it's important to be physically there for the interview because so much of communication is nonverbal. Without that face-to-face presence, he said, it's too easy to miss things like facial expression, body positions and other nonverbal cues. 

When the interview itself begins, Collemi said it's important to make sure the client is comfortable, at least at first. He suggested that auditors set the interview in a private, quiet place and begin the talk with generalities—what's going on with the industry or the company—and slowly lead into what they want to discuss. It's important that the client doesn't think the auditor is there, he said, to point fingers or accuse. That's because if people feel threatened or defensive, they tend to shut down and see the interview as a power struggle. It's important to make it seem more like a conversation than an inquisition. 

Collemi also noted that there may need to be multiple interviews―too many auditors talk to people once and call it a day. Auditors must follow up on points as new information comes out, or talk to someone else mentioned in the conversation. He acknowledged that this can be a lengthy procedure, but he said it's what's necessary to get the information an auditor really needs. He lamented that there were auditors who didn't treat interviews with the importance they deserve, saying too many default to a simple Q&A format. 

"In practice, auditors are not doing this consistently. It's not taught or trained enough. People are just going in and literally just reading a list of questions they have. That's not interviewing someone. You're asking 10 questions and that's it―put it in the work papers, you're done. It's a fluid process. You ask certain questions you want and another and another. You're having a conversation with someone. That's where auditors tend not to understand the process," he said. 

As for the questions themselves, he said an auditor should ensure that they make sense to the person being interviewed, using the right vocabulary to get the right information. Also, the auditor should ask only one thing at a time, using straightforward direct questions and making sure the person being interviewed has enough time to answer. Further, auditors must make sure they understand the answers before ending the interview: They need to separate fact from inference and make sure their understanding of the company's situation is accurate. 

Finally, he stressed the importance of being able to identify signs of deception. Auditors need to first establish a baseline by asking general questions such as, "How's business?" and "How are things going?" Doing so gives them a sense of how the people being interviewed answer questions and what their nonverbal cues are when they're relaxed, and it makes the auditor more aware of when reactions part from this baseline.

Most of these reactions, he noted, will be nonverbal. Interviewees may look away from the auditor, when before they would talk directly to him or her. They might cross their arms when before they were open. They might make distracting noises, begin tapping their finger on their desk, or begin leaning away from the auditor or toward the door. Collemi also said to look for involuntary stress reactions. The interviewees' neck and face might become red and splotchy; they might blink excessively, fidget intensely or shuffle their feet: These are all signs someone is not comfortable. 

Some of the reactions, though, might be verbal. An interviewee might be calm and pleasant when the auditor asks nonthreatening questions but will suddenly talk really fast or really loud when given a more pointed one. The auditor should also watch out for the interviewee stalling for time or attempting to add credibility, such as by saying, "I swear to God." Other verbal tics to watch out for include a sudden shift to overly formal or qualified answers that use phrases such as "to the best of my knowledge" as well as sudden bouts of amnesia indicated by insisting "I can't recall, I don't remember." 

While the client might be ruffled if the auditor seems skeptical, Collemi told his audience that it's important to emphasize that they're just doing their jobs. 

"You're not there to point the finger or accuse. ... You're just there to do your job, and these are standard questions," he said. 

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