RE: Incentives for completing audit findings

[Doshi, Pankaj C.]

Title: RE: Incentives for completing audit findings

Don,   It may be penalty or incentive from management perspective. But from an internal auditor’s perspective it is a mater of professional pride and job satisfaction to see those items being implemented. How about a bonus for the internal auditor for every recommendation adopted? J   Anyway, if recommendations are not implemented, there is a reason, probably a different one in each case. But what are those reasons? We need to know them to design the penalty or incentive. By choosing to not act on recommendations, management is saying, not in words but by action that they do not quite rank this as high as other competing matters that they need to attend to.   Here is an idea, I have tried with only a partial success. Suggest to the audit committee to adopt a procedure in which it requires a signed statement by president/CEO and possibly by relevant VP/department head that says something like: With reference to recommendation #xxx about subject YYY, I have chosen to delay its full implementation. I understand the risks involved in taking such action. [Optional: My reasons for doing so are………………] They must sign a separate sheet for each recommendation. Surely you would want to work on language and related steps, but keep the statement short. The act of having to sign this and to do so many times is very powerful.   -Pankaj   -----Original Message----- From: Whitehouse, Don [mailto:[EMAIL PROTECTED]] Sent: Tuesday, July 30, 2002 11:28 AM To: 'Doshi, Pankaj C.'; 'Tracey Sadler' Cc: '[EMAIL PROTECTED]' Subject: RE: Incentives for completing audit findings   Thanks Pankaj,   The audit committee actually used the word "penalty" rather than "incentive". Yes, I agree with your assessment of audit finding relevance. We are required to rank each finding from low to very high which deals with materiality and as you can imagine is subjective. However, management questions about the rank of each finding are minimal. Staffing is not likely to change. We do not have any issues where the validity of any reported audit findings are questioned. Our audit processes give us the opportunity to weed out immaterial findings before the audit report is issued. I am confident that our findings are well supported.  -----Original Message----- From: Doshi, Pankaj C. [mailto:[EMAIL PROTECTED]] Sent: Tuesday, July 30, 2002 10:38 AM To: 'Tracey Sadler'; Whitehouse, Don; [EMAIL PROTECTED] Subject: RE: Incentives for completing audit findings I actually have asked management as to why they fail to implement recommendations. It is a worthwhile thing to do directly and clearly, but privately. Since you are looking for incentive rather than penalty, consider having audit committee or the board offer additional resources. This could be positions, equipment, software, etc. Detail would depend on individual set of circumstances. Also, this may be a time for a bit of introspection. Are findings truly material and relevant? Are recommendations really practical and cost effective? Did we achieve to convey this clearly? A stronger 'yes' answer will create an inherent incentive for management to follow through, because they will be able to see that it is the right thing to do. Pankaj C. Doshi Internal Audit Department of Transportation Commonwealth of Virginia Phone: 804-371-0253   -----Original Message----- From: Whitehouse, Don [mailto:[EMAIL PROTECTED]] Sent: Tuesday, July 30, 2002 7:50 AM To: '[EMAIL PROTECTED]' Subject: Incentives for completing audit findings   My audit committee has asked that I propose methods to incent management to complete audit findings in a timely fashon. The audit committee suggested linking completion of audit findings to performance reviews. Currently, managers are required to set a target completion date on all audit findings. These dates and subsequent changes are reported to the audit committee. Does anyone have any suggestions or ideas? Thanks, Don