Auditees or clients? - In My Opinion - Brief Article

Internal Auditor, August, 2002 by Kenneth L. Glascock

IN RECENT YEARS, THE TERM "AUDITEE" HAS FALLEN OUT OF FAVOR. Instead, those who receive audit services are now typically referred to as "clients." In this post-Enron era, when society is re-examining the value external auditors add in maintaining efficient capital, it is more important than ever for external and internal auditors alike to distinguish an auditee from a client. External auditors under the current free-market, self-regulatory framework have no easy solution to the auditee-client dilemma and are understandably facing a quandary over how to maintain their independence and objectivity while simultaneously providing audit and consulting services. We, as internal auditors, need not become similarly entangled.

Internal auditors can and should occupy two roles: one as a consultant and one as a traditional auditor. Each of us must strive to add value to our organizations not only by identifying risks and proposing cost-effective, risk-mitigating solutions but also by identifying opportunities to improve organizational efficiency, save costs, and increase revenues. Auditors who are unable or unwilling to serve their organizations consultatively do a disservice to themselves, their organizations, and their profession.

At the same time, we must separate our two disparate functions. Assignments that involve consulting services should be viewed differently than audit or assurance engagements, as this distinction enables auditors to avoid potential conflicts of interest and maintain objectivity. One of the keys to maintaining this distinction lies in how we refer to those who receive our services. Although the term "clients" has been widely adopted throughout the profession, I believe it is misused and highly problematic if applied in the context of assurance or traditional audit services. Referring to recipients of non-consulting services in this way implies a lack of objectivity, and it seems to contradict our professional obligation to remain independent.

To clarify our role, we need to change the terminology used to describe those who receive audit or assurance services. The term "auditees," though shunned by many thought leaders in the profession, is a much more appropriate designation. Furthermore, the term is objective, neutral, and descriptive.

Labeling those whom we audit in this manner does not imply that we should address them as auditees in person or in written reports. Instead, the term can be reserved for use among auditors, the audit committee, and management. To reinforce the respect that auditees deserve, internal audit departments could even consider revisiting their mission statements and adding a phrase such as, "We will respect the time, dignity, and contributions of those whom we audit (i.e., auditees)."

Using the term auditee not only clarifies our role with respect to those who receive our services, but it also encourages internal auditors to approach their audit work with professional integrity. The term underscores our duty to remain independent -- a responsibility that cannot be overemphasized. If we, as internal auditors, confuse auditees with internal consulting clients, we fail in our primary mission to provide independent and objective assurance services.

Kenneth L. Glascock, JD, CIA, CISA, CISSP, CBCP, CFSA, is the audit director at Nordstrom Federal Savings Bank in Englewood, Colo.

To comment on this essay, e-mail the author at kglascock@theiia.org.

The opinions expressed are solely those of the author.