Behavioural aspects of internal auditing “revisited”
Mort Dittenhofer
Presents a series of issues
related to the behavioural
relationships between inter-
nal auditors and their audi-
tees. Includes suggestions for
the resolution of problems
that occur in these issue
areas. Covers such subjects
as motivating the auditee,
styles of management, man-
aging change and conflict,
communications, hostile
relationships, participative
auditing, understanding the
auditee’s culture and the use
of behavioural knowledge in
the audit.
Managerial Auditing Journal
12/1 [1997] 23–27
© MCB University Press
[ISSN 0268-6902]
Professor, School of Accounting, Florida International University, Florida, USA
Introduction
One of the characteristics that distinguishes
public accounting from internal auditing is
the latter’s heavy use of interpersonal rela-
tions. Public accounting deals with the inani-
mate records of an organization and their
relationship to principles of accounting,
established by professional accounting
bodies. On the other hand, internal auditing
treats the activities of management, people,
in the operation of their organizations. These
latter activities are related to standards, usu-
ally developed by other people in order to
determine compliance with procedures,
statutes and good business practice; with the
practice of economical and efficient opera-
tions, using predetermined operational stan-
dards; and for the achievement of the effec-
tiveness.
In all of the above, internal auditing evalu-
ates the activities of people and, thus, there
are personal relationships between the evalu-
ators – the auditors, and the evaluatees – the
people being judged. The relationships
between the two groups may be subject to
conflict or, on the positive side, to mutual
assistance. The internal auditor must be a
master of interpersonal relationships in
order to achieve a mutuality of the audit
effort. Thus, we are again going to review a
number of interpersonal activities that can
achieve positive relationships and hopefully
success in the practice of internal auditing.
Motivating the auditee
Much has been written about motivation. Yet,
it is the internal auditors’ greatest behav-
ioural tool. We are all familiar with Maslow’s
five essential needs. Yet there are two of them,
the “desire to be a part of the organization”
and “the need to be accepted and recognized”,
which can serve the internal auditor well.
The need to be a part of the organization
The auditee official can be convinced that he
or she is a part of the overall organization
dedicated to improving its operation. The
auditee can be assured that he or she will be
esteemed and considered to be affiliated with
management whose intent is to improve
operating conditions. The auditor must
approach the auditee with language which
reinforces this need and its potential resolu-
tion and convinces the auditee to take an
objective approach to the goal of the current
audit work. This must be accomplished by the
auditee’s assurance that this positive attitude
will be reflected directly or indirectly in the
audit report.
Esteem by self and others
This need can be met by convincing the audi-
tee to act directly in co-operation with the
audit staff in: identifying problem areas (usu-
ally known to him or her); assisting in the
investigatory work; and developing correc-
tive action. The important aspect here is that
the auditor identifies the auditee’s action
directly as a part of the audit effort. The audi-
tee normally will achieve the respect of man-
agement and peers through handling the
audit as a part of his or her management
team, in effect improving his or her opera-
tion’s management.
Relating to styles of management
There are four general styles of management.
These are the:
1 autocratic;
2 custodial;
3 supportive; and
4 collegial.
Each is widely different, and all reflect the
management philosophy and approach of its
managers. One can conceive that to use an
audit approach that conflicts with the man-
agement philosophy of the auditee manage-
ment would be quite unpopular and could
cause difficulties in obtaining voluntary co-
operation and assistance.
Probably the first and last styles are the
most important for this discussion. In the
first style, management rules with a strict
hand. Here, the auditor should not make
contact with staff without management’s
approval. However, it stands to reason that
the auditor must obtain information and
access to it must be made. If management
proves difficult, other steps must be taken.
The auditor should try to work with manage-
ment throughout the audit process. Close and
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Mort Dittenhofer
Behavioural aspects of
internal auditing “revisited”
Managerial Auditing Journal
12/1 [1997] 23–27
[ 24 ]
frequent contacts can convince management
officials that the auditor is “on their side”.
Thus, there should be candid discussions
aimed to assure management that the audit
objective is progressive and designed to help
improve the operation. Also a degree of this
audit behavioural pattern can smooth out the
relationships with custodial-style manage-
ment personnel.
As to the collegial style, the auditor should
take the approach that the auditor is part of
the management team; is a colleague or is an
adviser or consultant. To act in the tradi-
tional audit approach would in most cases
result in an “audit” classification as an out-
sider and not one to be trusted or who can be
helpful. The auditor should take the approach
that usually is associated with the auditee
group.
Managing change
One of the greatest problems that the auditor
has is to “sell” the changes that will be made
by the implementation of the audit findings.
Social scientists have identified a number of
reasons why people do not want to change
their method of operation. There are six or
seven. However, there are three that are prob-
ably the most important. These are:
1 fear of the unknown – what the change will
bring;
2 the bureaucratic aspect of the impact of
change – horizontally, vertically and
within; and
3 the ego aspect – the present methods are
inefficient or not adequate.
In each of these areas of auditee concern, the
auditor must take definite action to respond
to the anticipated problem and to assuage the
auditee’s fears or opposition.
In the case of the fear of the unknown, the
auditor should carefully review with the
auditee the probable results of the change,
both good and not so good. The auditee
should be advised of the methodology of reso-
lution that can be used and he or she should
be actively consulted as to the details of the
methods that are being recommended.
This latter suggestion will also help with
the second area of concern – the bureaucratic
activity that will be necessary to accommo-
date the change. Here, the auditee can have
the opportunity to help design the new meth-
ods and thus ensure that they will cause the
least disruption to the present operations. He
or she will be able to help in the design of the
changes as they impact on organization’s
internal and both vertical and horizontal
relationships.
Several approaches may be taken:
• The internal auditor should see the audit
change the eyes of the manager.
• The auditor’s concept of control should be
as far as possible a management concept.
• The auditor should emphasize a participa-
tive approach.
• The audit should be a balanced audit, not a
witch hunt.
• The auditor must completely abandon a
management (directive) approach.
• The internal auditor should attempt to act
as an adviser not as a policeman.
In spite of these attempts to reduce confronta-
tion and static, the internal auditor must
remember that his basic reason for being is to
“audit”. There can be no compromise on this.
As to the ego problem – the auditor should
emphasize that the change is evolutionary
not revolutionary. The change should be
viewed as improving an operation that is not
especially faulty – it is just helping to make it
more efficient and/or effective. The present is
not defective but it can be improved – again
with the auditee’s assistance.
Managing conflict
Along with change, conflict is a frequent
characteristic of the audit process (see
Chambers et al. (1987)). Conflict does not often
add to the achievement of the audit but, if not
handled properly, it can detract from it. Con-
flict can apply to:
• scope – as to management;
• objective – as to that of external auditors;
• responsibilities – other management ser-
vices; and
• values, dominance, perception of audit role
– as to auditees.
There are essentially four methods commonly
used to resolve conflict:
1 arbitration;
2 mediation;
3 compromise; and
4 directive.
Those methods attempt to arrive at a position
that conceivably is best for the organization.
They do not necessarily try to assuage the
feelings of either party. The degree of conflict
or the type identifies itself as:
• a yes/no approach;
• a degree approach; or
• a difference in identity: i.e. it is “this” not
“that”.
Probably the method that has the greatest
appeal from a behavioural approach is the
compromise method; if the difference is such
that it can be compromised. The next best
method is mediation; it is a type of
Mort Dittenhofer
Behavioural aspects of
internal auditing “revisited”
Managerial Auditing Journal
12/1 [1997] 23–27
compromise with the exception that the medi-
ation, using a referee, tends to retain more of
the organization’s interest. Binding arbitra-
tion is a case where a third party acts unitar-
ily hopefully in the organization’s interest.
Problems of people relations
Brink and Witt (1982), in their seminal work
on internal auditing, have inventoried a
series of concepts that will help to deal better
with people. The items are strictly behav-
ioural and are probably applicable to all sorts
of business relationships. They are:
• Remember that there are major variations
in basic capabilities and traits of individu-
als. Thus, the auditor should recognize
these differences and consider them in his
or her relations with auditee personnel.
• The major impact of feelings and emotion
must also be taken into consideration. The
auditor must identify these variations and
try to deal with them in an effective
manner.
• Related varying perceptions must also be
considered. The auditee’s staff do not see
things as does the audit staff. The varying
experience, education and environment of
both groups results in a dichotomy of atti-
tudes and interpretations. These differ-
ences can greatly impact on communica-
tions and can be a constant source of aggra-
vation if not carefully considered.
• The size of the auditee group can impact on
relationships. This variation of what is
labelled as group dynamics, requires the
auditor to modify his or her tactical
approach when dealing with large groups,
many of which do not have internal cohe-
sion relative to many of the above behav-
ioural variations.
• The impact of various operational situa-
tions as a final variation in this inventory.
Each of the varying situations impacts
differently on how people feel and act. The
auditor must take these variations into his
or her consideration in his or her interper-
sonal relations.
Common characteristics of
individuals
Brink and Witt (1982, pp. 148-50) have also
listed a group of characteristics of individu-
als that exists in people in varying degrees.
The auditor must take them into considera-
tion because of their impact on personalities,
attitudes and activities. Knowledge and con-
sideration of these differences can help to
ensure more harmonious relationships.
These types of common traits exist to varying
degrees in each of the auditee individuals
from top to bottom:
• to be productive, busy at meaningful work;
• to have an urge for dedication to an effort
that is important;
• to have a desire to serve; to provide assis-
tance to another individual or association;
• to be free to choose; to have independence
and freedom of choice;
• to treat others with fairness and honesty
and reciprocally to receive the same treat-
ment;
• to have a bias towards one self; to expect to
receive more praise than criticism;
• to receive the satisfaction of one’s ego; to be
complimented and praised;
• to have value returned for the effort given
and for the work done; conversely, the
reverse is anathema;
• to function as a creature of habit; to wel-
come and act similarly to what one is accus-
tomed to;
• to be a part of a team; to derive pleasure
from the team effort;
• to have compassion to the distress of others,
especially when such compassion is viable
to others;
• to have self-interest to a degree somewhat
less than selfishness and greed;
• to be sensitive to the feelings of others and
to be able to help them keep calm in spite of
situations that are distressing and disap-
pointing.
Awareness of one’s self-image
In a situation where there is as much inter-
personal relationships as there is in internal
auditing it is important to be aware of and to
retain one’s sense of balance and to see one-
self as seen by others (see Ratcliff et al., 1988)
The main elements of this important aspect
are:
• a knowledge of one’s own strengths and
weaknesses as related to mental, physical,
emotional and personality characteristics;
• a sense of belonging to a productive and
satisfying work group – harmony and unity
of purpose are important;
• a sense of natural order in one’s own envi-
ronment relative to where one fits within
the immediate group and within the larger
organization;
• a desire to serve the needs of others – in
addition to the projection of a co-operative
approach is the inner feeling of being able
to contribute to the welfare of others;
• a feeling of productivity that bolsters one’s
ego and tends to give one the assurance in
self that is necessary to instil confidence in
others;
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Mort Dittenhofer • a sense of integrity that comes from the
Behavioural aspects of belief that one is participating in an ethical
internal auditing “revisited” environment – this condition is easily con-
Managerial Auditing Journal veyed to others and tends to cement a rela-
12/1 [1997] 23–27 tionship with the auditee.
The above six characteristics tend to create in
a person a sense of character and ability that
is infectious and, through transmitting this
to others, a reciprocal attitude of proximity
intellectually and professionally.
Communicating effectively
Communication consists of interviews, con-
ferences, oral reports and written reports. It
is imperative that the auditor use these
devices in a positive way so as to create a
harmonious environment in which to per-
form the audit.
It is axiomatic that the language used
should be clear, concise, free of acronyms, in
good grammatical structure; and that it
expresses the content in a simple logical
arrangement. These items are essentially
mechanical aspects. However, there are ele-
ments of presentation, both oral and written,
that should be considered for the purpose of
good behavioural relationships. Some of
these are:
• Do not speak or write in a directive mode.
The author is not part of management.
• Do not use terms that imply erroneous or
substandard work on the part of the audi-
tee.
• Do not back the auditee into a corner either
verbally or in writing.
• When recommending, treat the auditee’s
ego with consideration. Imply that changes
will “improve” operations not “correct”
them.
• Allow the auditee to recommend changes in
report language as long as the substance
remains intact.
• Do not argue, moralize or offer judgemental
comments. The auditor is searching for
facts and is not acting as a missionary.
• Keep the reporting and even the comments
in a positive perspective, giving judicious
and careful credit for operations that
appear to be well performed.
• Consider mitigating circumstances when
searching for causes of findings.
• Allow the auditee, during conferences and
when considering reports, to express opin-
ion. Confirmation as to factual content is
essential. However, difference of opinion as
to circumstances or suggestions for correc-
tive measures are the prerogative of the
auditee. Subsequent repudiation of the
auditee’s position should be performed
with good taste and gentle logic.
[ 26 ]
• Be courteous to all levels of auditee staff.
Treat auditee management with respect.
• Conduct conferences and interviews on the
auditee’s premises. Auditees are more com-
fortable and conceivably will be more co-
operative.
• Consider the possibility of stress on the part
of the auditee. Tread gently when this condi-
tion is observable and maybe return tomor-
row when the stress is not observable.
Meeting hostile opposition
In spite of all of the good intentions to develop
a harmonious relationship with the auditees,
it is possible that the seeds of co-operation
and amiability will fall on infertile ground.
The reason may be related to individuals who
are antagonistic to the concept of audit.
There are essentially three types of hostile
opposition:
1 An indication of an extreme lack of inter-
est in the audit, refusal of top auditee offi-
cials to participate in meetings to consider
the content of entrance, interim or closing
conferences. Subordinate staff members
are sent.
2 The auditee acts in a confrontational
manner. Personnel and records are not
available; reasons are required for audit
work; delays plague the audit effort; audi-
tors are accused of improper conduct and
interference with the auditee’s work.
3 The auditee refuses to take any action
during or after the audit, but continues to
operate as before. The auditee drags
his/her feet on any action up to the point
of insubordination.
The auditor is faced with a problem as to
what to do to counter these actions (see
Sawyer, 1988). Arguing will only increase the
level of antagonism; logic will fall on deaf
ears. Persuasion and appeal to the auditee’s
interests may tend to break the ice, and an
attempt to reach some mutual point of agree-
ment such as the auditee’s improved status
may help.
When all else fails, it may be necessary to
bring in the heavy guns. Top management
may have to step in to resolve the problem.
However, even in this event, the methodology
should not be to “rule in favour of the audi-
tor”, but rather to admonish the auditee in
the interest of not perpetrating damage to the
organization. Presumably the message will
go through – the auditors are management.
Conducting participative auditing
This is a term for a type of auditing that is the
epitome of good performance auditing, at least
from a behavioural approach. Essentially, it is
Mort Dittenhofer
Behavioural aspects of
internal auditing “revisited”
Managerial Auditing Journal
12/1 [1997] 23–27
the co-operative effort of the auditor and the
auditee to conduct an audit. The elements
are:
1 At the start of the audit, ask the auditee if
there are areas that should be audited.
2 Develop a co-operative approach with
auditee staff assisting in the:
• programming of the audit;
• conduct of the audit.
3 Obtain agreement on recommendations
for corrective action.
4 Obtain agreement on report content.
5 Include in the audit report information the
fact that the auditee pointed out areas to
audit; participated in the audit; assisted in
the resolution of the problems; and has
instituted corrective action.
The success of the above is contingent on the
auditors’ credibility for honesty and candour.
Using behavioural knowledge in
the audit
A recent article in Internal Auditing states
that the internal auditor is, “in a better posi-
tion than external auditors to assess risk
factors” (Green and Calderon, 1996), The
writers believe that the internal auditors’
intimate knowledge of their organizations as
a result of their proximity to organization
personnel enables them to obtain and evalu-
ate oral and visual evidence relating to atti-
tude and behaviour more effectively.
It is generally held that organizational
behaviour is a result of these factors:
• conditions, generally the quality of the
internal control structure;
• motivation or need on the part of employees
and officials to perform ethically and hon-
estly or vice versa; and
• attitudes or the basic personal characteris-
tics of employees at all levels.
It stands to reason that the internal auditor
has continual day-to-day relationships, both
personal and official, with the organization’s
personnel. This closeness results in an evalu-
ative position enabling acceptance or rejec-
tion of both oral and written assertions and
affects the degree of dependence that can be
ascribed to them. Experience, knowledge of
behavioural factors, and judgement join to
provide the internal auditor with a strong
audit tool which can affect the audit results
materially and thus the organization’s well-
being.
Conclusion – the organization
culture
An article in The Internal Auditor (Balheran,
1995) discussed the need for the internal
auditor to consider the organization culture
in structuring the audit approach and in
preparing the audit report. The article cited
elements of this culture such as:
• commitment to deliver quality products
and service;
• quality of staff training and development;
• corporate identity, i.e. policy, structure, etc.;
• decision making; and
• management concerns for staff.
The gist of the article was that the audit
should not be contradictory to the elements of
the organization culture if the report is to be
accepted and implemented. There is no ques-
tion other than that the question of culture
should be considered. In fact, the generally
accepted position relative to mentioning
“mitigating circumstances” infers this posi-
tion. Thus, the audit approach and its report-
ing should be formulated, as far as possible,
within and in order to further these cultural
aspects.
There should not, however, be a blind
attempt to ignore or to omit a finding if seem-
ingly embarking on a collision course. Rather,
there should be a recognition of the diversity
of position, providing a fair description of the
cultural divergence so that management can
make a decision based on all of the facts of the
situation.
The cultural positions reflect the beliefs
and positions of management personnel.
They might be considered to be organiza-
tional mores and should not be taken lightly.
Nevertheless, they are not sacrosanct and
they are open to evaluation – but using con-
sideration and respect. The comment that,
“you can’t fight City Hall” may be true – but it
is also true that you can point out to “City
Hall” that its measures can be improved – and
thus to the enhancement of “City Hall’s”
operation and reputation.
References
Balheran, L. (1995), “Corporate culture”, The
Internal Auditor, August pp. 56-9.
Brink, V.Z. and Witt, H. (1982), Internal Auditing,
John Wiley & Sons, New York, NY, 1982,
pp. 145-7.
Chambers, A.D., Selim, G.M. and Vinten, G. (1987)
Internal Auditing, Commerce Clearing House,
Chicago, IL, pp. 68-73.
Green, B.P. and Calderon, T.G. (1996), “Informa-
tion privity and the internal auditor’s assess-
ment of fraud risks factors”, Internal Auditing,
Spring, p. 14.
Ratliff, R.L., Wallace, W.A., Sumners, G.E., McFar-
land, W.G. and Loebbecke, J.K. (1988), Internal
Auditing, Institute of Internal Auditors, Alta-
monte Springs, FL, pp. 543-5.
Sawyer, L.B. (1988), Sawyers’ Internal Auditing,
Institute of Internal Auditors, Altamonte
Springs, FL, pp. 1067-8.
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