Developing an Effective Audit Strategy to Support Business Objectives

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Episode 143: Financial integrity isn't optional—it's essential. That's why developing a structured, effective audit plan stands as one of the most critical responsibilities for finance leaders today. 

This episode unveils a nine-step framework for creating audit plans that deliver genuine value. From understanding your business environment and conducting thorough risk assessments to defining clear audit scopes and establishing communication protocols, each element works together to create a process that leadership can trust. We explore how to effectively present technical findings to leadership teams in ways that drive action, not confusion. Most importantly, we examine why leadership commitment fundamentally determines whether an audit becomes a transformative tool or merely a compliance exercise.

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Episode outline:

1. How to structure an effective audit plan,
2. Presenting the findings to the leadership team, and
3. Why leadership is essential for the auditing function.

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Episode Transcript

Stephen McLain (00:05):
We audit our books and our processes to
ensure the financial health ofthe organization is sound.
To develop an effective auditplan, you need a structure that
considers the industry andmarkets, a proper risk
assessment, a well definedscope, a way to evaluate
internal controls, a process tocollect data, working

(00:28):
communication protocols and acoordinated and aligned
schedule, a well planned andexecuted annual audit gives
confidence to leadership and tostakeholders that the
organizational financial risk islow. Please enjoy the episode.
Welcome to the finance leaderpodcast where leadership is
bigger than the numbers. I amyour host. Stephen McLain, this

(00:51):
is the podcast for developingleaders in finance and
accounting. Please considerfollowing me on Twitter,
Facebook, Instagram andLinkedIn. My usernames and the
links are in this episode's shownotes. You can also follow
finance leader Academy onLinkedIn. Thank you. This is
episode number 143, and I'll betalking about developing an

(01:13):
effective audit plan that helpsto ensure the accurate financial
health of the organization. AndI will highlight the following
topics, number one, how tostructure an effective audit
plan. Number two, presenting thefindings to the leadership team.
And three, why leadership isessential for the auditing
function. Former Mayor MichaelBloomberg said auditors are the

(01:36):
guardians of financialintegrity. I hope everyone is
enjoying this audit series. Westill have more to discuss.
Developing the annual audit planshould never be something we
haphazardly put together. Itrequires meticulous planning,
plus an emphasis from theleadership to be built,
scheduled, resourced and thenexecuted. I have said this many

(02:00):
times in this series, the auditplan should never be an
afterthought, but is anessential part of the annual
operations calendar. Our levelof audit helps us to identify
areas of weakness that could beexploited and to ensure our
financial records are accurate,which then leads to better
governance and then on to moreconfidence in the organization

(02:23):
as a whole. By the way, did youlisten to episode number 142?
Protecting financial healththrough strategic risk analysis?
I focused on the importance ofconducting a thorough risk
analysis to help identify areasthat may have weaker internal
controls. This, in turn, canhelp with identifying the topics
for inclusion on the annualaudit plan, if they have high

(02:46):
residual risk, if you did notlisten, please do when you get
the chance again. Why do weaudit organizations? Conduct an
annual internal audit to ensurethat their operations, finances
and compliance practices arefunctioning effectively and
aligned with strategic goals.
The process serves severalimportant purposes, ensure the

(03:08):
accuracy of financial reporting,strengthen internal controls,
support compliance requirements,help to reduce risk, improve
efficiency and provideindependent assurance to
leadership for an audit to besuccessful, we need for the
leadership to be committed tothe process and to apply the
findings within any areasresponsibility they oversee.

(03:31):
This is basic leadership. I wantthe leaders to fully embrace
this process so they work hardto ensure better financial
accuracy and better controls.
This is what makes anorganization great, instead of
just good. I'm not sure if yourealize, but through finance
leader Academy, we offer anamazing conflict management

(03:53):
course that is conducted by aformer Army colleague of mine,
Mark McMillian of McMillionleadership associates,
professional and even personalrelationships continue to be
strained by the pressures we allface. Mark presents a process to
overcome tense situations, to deescalate hostile encounters. You

(04:14):
can find more information atfinance leader academy.com we
have several ways to supportorganizations of all sizes to
bring this critical training totheir teams. A link is in the
show notes and Mark and I arehere to help you move forward in
getting this training to yourteam. Now. Team alignment is
essential for the conduct of asuccessful audit. A requirement

(04:38):
of the audit plan that I willmention in a few minutes is to
communicate with those involvedabout the expectation for the
process. It's essential tounderstand your role and your
responsibilities. Now let's talkabout developing an effective
audit plan. Now, number one, howto structure an effective audit
plan? The objectives? Of aneffective audit strategy are,

(05:01):
and I've shared these severaltimes, ensure financial
accuracy, assess internalcontrols, identify and mitigate
risk and to support the businessobjectives I want to present
here right now, one way todevelop your audit plan The
following is a nine stepprocess, beginning with knowing
the business environment and themarkets, all the way to

(05:24):
conducting follow ups on anyaudit findings. Now the first is
to understand the business andindustry. You must know the
business model, which includesthe organizational structure and
its reporting systems. And youneed to know the current
regulatory environment reviewpriority results significant
changes and known risks. Next isto conduct a risk assessment,

(05:49):
identify financial, operational,compliance and fraud risks using
a variety of acceptable methods,prioritize high risk areas for
inclusion in the audit Next, Iwant you to define the audit
scope and objectives, determinewhat accounts, processes and
controls that will be examined,include key financial cycles,

(06:13):
and clarify audit deliverables,such as reports, testing
outcomes and recommendations.
Now, this is a big one. This isa big part of the audit plan.
Next evaluate internal controlsand policies, assess the
company's internal controlframework, like control
activities, for example, how doapprovals and reconciliations
happen? Also design controltesting procedures using

(06:36):
walkthroughs, sample testing andalso observations. Next is to
develop the audit plan and thetimeline. Now is the time to
create the formal audit planthat includes the calendar, team
assignments andresponsibilities, the material
thresholds for financialmisstatement and also the
testing methods and identifywhat audit system you will use

(06:59):
to track the progress, whetherit be online or on paper. Next
is to establish communicationprotocols, define how and when
updates findings and concernswill be reported, communicate
expectations to key leaders, theaudit team and also the audit
committee. Next is to integratedata analytics and the

(07:22):
technology use data drivenauditing techniques, for
example, trend analysis versusoutlier detection, continuous
control monitoring and then fullpopulation testing. Next is to
present your findings, ensureyou report findings per the
communications plan and thecalendar, and then finally,
conduct follow ups as necessary.

(07:47):
Now this was quite a rundown. Itwas brief, but it was to get you
thinking, sure, you work toadopt a process that fits your
organization, that this was oneway to do it. Number two,
presenting the findings to theleadership team, presenting
audit findings to the companyleadership team is a critical
step in ensuring transparency,accountability and informed

(08:11):
decision making. An effectivepresentation translates
technical audit results intoclear, actionable insights that
leaders can understand and actupon it, highlights areas of
strength, uncovers potentialrisks and identifies process
gaps that could impact financialaccuracy, operational efficiency

(08:34):
and regulatory compliance. Bycommunicating these findings
clearly, auditors not onlyfulfill their oversight role,
but also provide leadership withthe knowledge needed to
prioritize corrective actions,allocate resources effectively
and strengthen internalcontrols, ultimately
safeguarding the organization'sintegrity and long term success.

(08:57):
And three, why leadership isessential for the auditing
function. A company's leadershipcommitment to a successful audit
program is essential because itsets the tone for integrity,
accountability and operationalexcellence throughout the
organization. When executivesand board members actively
support the audit process, theysignal that accurate reporting,

(09:20):
strong internal controls andcompliance on non negotiable
priorities. This commitmentencourages transparency, ensures
that resources are allocated toaddress audit recommendations
and fosters a culture wherepotential issues are identified
and corrected before theyescalate. Ultimately,

(09:41):
leadership's engagement not onlystrengthens stakeholder trust,
but also enhances theorganization's resilience, risk
management and long termperformance. Never forget that
accurate findings lead topositive change, and that great
leadership ensures we are alwaysimproving. You know. How much I
love great financial leadership.
Auditing requires leadership toensure we are doing the right

(10:04):
things in our organization.
Leaders need to ensure theproper procedures are followed,
that internal controls areadequate, so that weaknesses
can't be exploited by those whowant to steal or do harm. And we
need to practice good governanceso we instill confidence, which
means our future is more secure.
Never stop leading yourorganization. Lead with

(10:26):
greatness. Always for action.
Today, how is yourorganization's audit strategy?
Does it meet the needs of thebusiness? I would recommend that
you review your audit processand how you plan the annual
audit function, I presented oneway to do it today, ensure that
you validate your process worksand meets all the requirements

(10:49):
for continued, successful auditprocess. Today, I talked about
developing an effective auditplan that helps to ensure the
accurate financial health of theorganization, and I highlighted
the following points. Numberone, how to structure an
effective audit plan. Numbertwo, presenting the findings to
the leadership team. And three,why leadership is essential for

(11:11):
the auditing function. Again, Ilove leadership and I love
improvement the audit functionrequires and delivers both when
conducted properly. I wantleaders at all levels to be
committed to developing an auditstrategy that works, because the
results can help you go to ahigher level. It's okay for

(11:31):
audit findings to showweaknesses. I would be
suspicious of an internal auditthat found everything to be
okay. There's always room forimprovement. You can have areas
of improvement and still havethe residual risk be rated as
low. This all relies on a greatattitude focused on improvement
and problem solving rather thanblame and deniability. Embrace a

(11:54):
great audit process to ensurecontinuous improvement. Next
episode, I will be talking aboutthe role and function of
forensic accounting, and thatshould be fun if you ever wanted
to find a role that usesdetailed data to find
discrepancies. This is it. Acareer in forensic accounting
can be incredibly rewarding.

(12:17):
I hope you enjoyed the financeleader podcast. You can find
this episode wherever you listento podcasts. If this episode
helped you today, please sharewith a colleague until next
time, you can check out moreresources at finance leader
academy.com and sign up for myweekly updates so you don't miss
an episode of the podcast andnow go lead your team and I'll
see you next time. Thank you.
Foreign.