There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.
Abdullah Mansour: Welcome back to Audit Smarter. I'm your host Abdullah Mansour. Here with Sam Mansour CPA. Today we're focusing on a deceptively simple part of every audit asking questions. Sam, why are audit inquiries so important?
Sam Mansour: Yeah, well, thanks for having me again. And, um, I'm really excited to continue this series [00:00:30] and, um, you know, provide people with more information and more layers to how to perform better audits. Um, so, you know, when we're talking about the audit inquiry topic, it's a great topic because it is a huge part of what we do as auditors to collect information. Right. We can collect physical evidence, um, you know, get check registers, GL detail and then look at supporting documentation. But then also, [00:01:00] you know, to add context around that, we will, you know, perform inquiries is very, you know, very, very big part of what we do. So it's a great topic to, to cover on.
Abdullah Mansour: Yeah, we, we cover a few topics now and this is the one that I'm excited about kind of I don't know much about auditing yet, but I'm excited to jump into this and see what you recommend here.
Sam Mansour: So yeah, I mean, so basically audit inquiries, you know, they help auditors gather information and assess risk, especially when evaluating internal controls, internal controls and and potential [00:01:30] fraud when it comes to internal controls. Really we need to understand what are the controls that the client has in place so that we could then properly audit them. And you know, when you think about fraud, you're definitely having a lot of conversations with people trying to understand the systems and the controls around, you know, what's that client doing and how they're doing it. So those are two really big areas for inquiries. But the quality of the answers we get is only [00:02:00] as good as the questions that we ask. And so if you think about that, you know, the way that you design your questions and the inquiries really has a, you know, I would say I'm trying to think of a good word here, but it's just a massive impact on what kind of responses you get. And I'm sure you've heard of things like, you know, open ended questions or if a client is starting to respond about something and they keep talking [00:02:30] and talking, and then you jump in and you're like, oh, yeah, I know I get it. And you start to kind of talk over them or before they've completed their answer, you give another question. So really, maybe they would have led you someplace if they had, you know, if you'd given them a little bit more time.
Sam Mansour: So asking really good questions, how you ask them, the timing of them not interrupting the client, how you structure the question are all really important. Poor inquiries lead to more surface level responses and [00:03:00] missed opportunities to uncover real issues. So, you know, if you're if your inquiries are not strong. The problem then is that you're almost you know, I don't say purely, but you're very heavily relying on the physical audit evidence that you capture, um, invoices and other transactions to kind of piece together, you know, what's going on in the audit. But if you're able to have effective conversations [00:03:30] with them, ask good questions, get good responses. You go beyond that, that surface level conversation, and you really start to get into the meat and potatoes of the audit. When I have worked with clients in the past, some of the most effective audits I have done is where the client feels comfortable providing me with answers. So if I come in as an auditor, you know, right off the bat they're going to feel concerned or hesitant. And who's this guy? [00:04:00] And if I just dive into questions without kind of any kind of a warm up there, the conversation's cold, right? The environment is cold. So if I ask critical questions just right out the gate, I find personally that they're not really apt to give me good answers because they're.
Abdullah Mansour: Still kind of defensive a little bit.
Sam Mansour: Is that exactly because I'm the unknown guy? I'm the auditor coming in asking them questions?
Abdullah Mansour: Yeah. It reminds me a lot of, uh, interviews, which [00:04:30] totally makes sense. I've. I've been on interview panels where the main guy would say, don't don't stop them. Let them finish whatever they're going to say, because there might be more information there that could be helpful to the interview. So it sounds very similar to that in a lot of ways.
Sam Mansour: Yeah.
Abdullah Mansour: Well, what's one of the most common mistakes auditors make when it comes to asking questions?
Sam Mansour: Yeah, I mean, I would definitely say asking yes no questions. Those can be very, very dangerous because sometimes you can lead the client to a specific answer, [00:05:00] or you can make it easy for them to get away with an answer. So think of it like if you're taking a test and you are just getting them like a multiple choice question and it's a yes and a no, though that would seem a lot easier than if you had a question and you had no options for a yes or no or multiple choice answer. Um, it's kind of a blank slate and you're like, whoa, I actually have to like, fill in the gaps here. So yes, no questions. Um, definitely [00:05:30] lead to specific answers. And we and we want to try to avoid that. So for example, um, you know, you might say you reviewed this reconciliation, right? I mean, what are they going to say. No.
Abdullah Mansour: Oh yeah. Of course. Yeah. That's a pretty easy answer. Yeah.
Sam Mansour: They and they and they almost kind of have to say yes. Maybe if they're even if they're lying. I mean, I don't want to assume people are going to lie, but but just the way that you ask it. Right? You review this reconciliation, right? I mean.
Abdullah Mansour: Yeah. No, [00:06:00] no. Wouldn't sound good. Yeah.
Sam Mansour: It feels weird to say no.
Abdullah Mansour: Especially.
Sam Mansour: If you put on the spot. Um, so so that's one thing. It kind of leads them to maybe, uh, or pushes them into the direction of a certain answer. The other thing is, it doesn't really give much insight. So let's say that they did review the reconciliation. And the answer is actually yes. So you say you review this reconciliation, right? Then they say, yes I did. It's like well that's it right. As [00:06:30] far as.
Abdullah Mansour: That.
Sam Mansour: You're done.
Abdullah Mansour: Yeah.
Sam Mansour: So you ask a follow up question, which you could. Um, but that's but that's, you know, it's just it just shows how limiting that kind of a question really can be.
Abdullah Mansour: That totally makes sense. Yes or no question. Yeah. I could see how if I were asked yes or no question like, yeah, why? So what what makes a good audit question in that case? Now we know kind of the bad or not the bad, but maybe not a great question.
Sam Mansour: Yeah. Um, I mean, honestly, there's a few different characteristics. [00:07:00] And so we can kind of walk through a few different options when it comes to some good.
Abdullah Mansour: Yeah, that'd be great questions.
Sam Mansour: And you know, I know there are a lot of tools out there to help ask that help you ask good questions. So, you know, we're going to jump into a few examples here. But I'd highly recommend that, you know, if you're listening to this podcast, that you understand the importance of good questions and that you really take a deep dive into how to ask good questions. Another thing could really that that really could make a big difference is your personality. So [00:07:30] let's say that you're kind of more of a chatty person. Maybe you talk too much. Let's say you're you are a reserved person. Let's say you don't talk enough, right? So, so depending on the type of professional type of person you are, it could really dictate, you know, the style and maybe some of the pitfalls that you're running into. But if we were to talk kind of more in general terms I would say great questions are open ended. We kind of talked about this a little bit, but but they're open ended. They're [00:08:00] specific. Okay. So if you say, for example, tell me about internal controls in general. It's like, well which ones. Okay. Uh, let's say if you dive in, let's say we'll say we get a little more specific and you say, tell me about internal controls related to cash reconciliations and cash receipts. Just cash in general. Okay. So now we're in one section. But cash receipts collection of cash is probably going to be probably going to have very different controls than cash reconciliations.
Abdullah Mansour: Oh right. [00:08:30] Sure.
Sam Mansour: So you're so you're kind of giving them too many things to latch on to. So I would try to kind of limit it to like one very, you know, specific area that you're trying to understand. Like for example, hey, you guys received cash at this specific in this specific area. Um, uh, let's say it's hypothetically like a little ice cream booth. You know, how do you guys receive cash in that specific area? Because receiving cash in that specific area could be very [00:09:00] different than receiving cash in another area. So it really depends, right. Um, so so you can kind of be specific or try to be as specific as you want, depending on, um, you know, the client and the environment and design it to design the questions to reveal processes and maybe some of the judgments that are made in the environment. Right. You want to kind of get a better understanding of of what's going on there.
Abdullah Mansour: So it sounds like it's kind of in the middle [00:09:30] somewhere where you don't want to be too direct with the question or not direct, but you want to be somewhat open ended, but not just like a yes or no. So somewhere in the middle sounds like a sweet spot maybe.
Sam Mansour: Yeah, definitely a sweet spot. But then also, you know, try to narrow it down to a specific area and try to have them only address one topic and don't give them in that one question. So open ended. But don't give them in that one question, three different things that they could potentially answer. Right. Imagine someone asks you, sometimes you'll see people ask you, hey, [00:10:00] I have I want to ask you some questions. And they ask you like three different questions in one shot. And it's like it's really hard to like, remember what was number two or number three. You're trying to figure out I'll answer one two. And sometimes sometimes people will.
Abdullah Mansour: Get back to your third one.
Sam Mansour: Yeah, exactly, exactly. And you kind of feel dumb saying, remind me what that third question was again. You know.
Abdullah Mansour: That never feels good.
Sam Mansour: Yeah. And then instead of using did you do X, which we kind of talked about before. Right. Um, you reviewed this reconciliation, [00:10:30] right? Or did you do this? Okay. Instead of doing that, I would try to ask questions like, walk me through how you review the reconciliations. Okay. What do you look for? Um, what happens if it's off? Right. So kind of try to obtain kind of a deeper understanding of that specific area. What I always like to tell people, especially newer team members, you know, when you're doing these inquiries, um, pretend like you [00:11:00] are a new hire at the client and pretend like you don't have any prior history or prior background of how this should work, and just sit there and learn. And actually, I will tell the client that too. When I'm doing these inquiries, I'm like, look, let's say I've been in the audit field for eight years now, and I am, you know, so the client doesn't think that I know nothing about payroll, for example. And they and they think that, oh my gosh, why is this person auditing me? And he has no idea. I'll typically say, look, you know, I understand [00:11:30] how payroll generally works really well, but I don't understand how you do it here. Okay. That's very new to me. And so what I want you to do is pretend like I know nothing about payroll, pretend like I'm brand new to this, and you're explaining it to someone for the first time, and I'm going to ask you questions as if it's the very first time.
Abdullah Mansour: As if you're a new employee to their firm.
Sam Mansour: And and to the client. And you're a new employee to this this payroll processing. Right. [00:12:00] Because because what happens is you don't want to fill in gaps in the process because they like for like, for example, maybe they don't explain specific things to you because it's like, well, that's just how it's done for payroll, right? Of course.
Abdullah Mansour: Obvious. Yeah.
Sam Mansour: Yeah. But but the thing is, what if they don't actually do it like that, you know.
Abdullah Mansour: Yeah.
Sam Mansour: So so you want to hear from them. You want them to explain every aspect and kind of somewhat [00:12:30] excruciating detail, unless it's very crystal clear to you that they are actually doing that. So these types of questions, um, they, you know, they're not just surface, they're they get you kind of a little bit more in depth. Um, and it kind of gets the person answering the questions to really ask if they're teaching the process to you. They always say it's a good way for people to learn. Right. If you're teaching somebody else. So maybe they hadn't really teached or taught it to someone [00:13:00] in the past. So it's a good opportunity, opportunity for them to kind of share that information with you, talk you through it. It's a really good way for you to collect it. I have been told, like even a few days ago, that people really like how I ask questions because I am very, just raw, very basic. I, I don't assume anything. I don't assume I know anything about what they're doing. And what I do is I collect information and then I have my background how the process should [00:13:30] work typically, and then I'm evaluating it against that.
Sam Mansour: And maybe if it doesn't necessarily like meet up with one of my expectations, then, um, I'll ask them. I'll say, hey, I thought, you know, you typically when you're reviewing timesheets, you look for the prepare and the reviewer signature as a good internal control. I didn't hear you say that in here. How do you guys do that? And so they might say, oh, well, it's the software. Actually, you know, they just the prepare hits a [00:14:00] button and when they hit that submit button, it actually does indicate that they have approved it. And then when the reviewer sees it, if they hit the next button, it indicates that they would have reviewed it. So it's like, oh, okay. So it's not a sign off. It's it's actually a they're they're achieving the result of the prepare reviewing it. And they're achieving the result of the reviewer reviewing it before it's submitted to to payroll for processing. But they're just doing it in their own way.
Abdullah Mansour: Yeah, that makes sense. I like the way you go into [00:14:30] firms and ask them to teach you as if you're a new employee and you tell you're a new auditor to do the same thing. That seems like more of a natural flow. Anyway, rather than asking a yes or no question, that seems like the conversation wouldn't wouldn't flow very well. So I like how you would go in and ask them to teach you as if you're a new employee. It seems a lot more natural of a conversation, I guess. Yeah, well, that totally makes sense. How can auditors improve their inquiry skills?
Sam Mansour: Practice practice practice practice. Um, I read this, uh, book on, um. [00:15:00] It was on selling. I think it was. It was actually called spin selling by Neil Rackham. It's actually a really good book for anyone interested. And I think it was in that book where he said, you know, if you're trying to train yourself to sell, for example, um, don't use something you've just learned, like in a book or a course on a big deal. Write on a big sale because it's not going to be familiar to you. It's going to be kind of clunky. And I think the same thing is true when it [00:15:30] comes to these inquiries. Um, especially for younger auditors, where you're not as comfortable with the client, you're not as comfortable being out in the field, and you're expected, expected to come in there and ask them some, maybe some potentially some tough questions because maybe there are gaps in how they operate. And so you're asking them very invasive questions. And it's not just potentially uncomfortable for the client, but it's probably uncomfortable for you. So if you're able to practice asking those questions, [00:16:00] that's huge. And this might seem a little weird, but role play different scenarios as part of like a, a staff training. So like for example, let's say you're, you're, you're an entry level person in the organization. You're going out on an audit in a couple of weeks and you have a senior level person, you know, the senior level person. And for good training should help the staff auditor just by saying, hey, why don't we come into the group together, group setting and let's do lunch and let's [00:16:30] try asking each other questions that might be highly relevant in this, in this, um, audit. So then the team members can hear each other asking those questions, and then the senior level person could help them adjust. So let's say they're asking yes no questions. Let's say someone's interrupting. Before someone is able to complete the answer of their question, they can kind of like it's like getting warmed up, then kind of kick the can around.
Abdullah Mansour: Yeah.
Sam Mansour: In that roleplay scenario, it sounds kind of goofy, but but the role play will give you the practice, so you're not going in [00:17:00] cold. That's not the first or second time you're ever asking these clients this question because yeah.
Abdullah Mansour: That's going to be oh go ahead. Sorry. Oh no role playing any kind of uncomfortable sometimes I've done in my career. But it's the one of the most helpful things I've done in, in certain situations, like with interviews or anything like that. So it's it's been very helpful to me. So I can see the value in that for sure. In a situation like this.
Sam Mansour: Yeah. I mean, you want to I think you want to just be able to hear yourself saying the question [00:17:30] and feel comfortable with those questions coming out of your mouth. Like, for example, a lot of times people say, oh, Sam, why are you so comfortable talking with people about payroll and payroll related information? I'm like, because, I mean, I've been doing it for ten years. Like, it's just something I need to know that I need to get there. A listing of each person or organization, how much they get paid and what's their PTO balance. And you know, I need to audit their hourly rate against their approved HR form. You know, it's just stuff I need [00:18:00] to know. But but as an entry level person, you might think, oh, it's really strange to ask them to give me the the pay scale for everyone that works here, you know?
Abdullah Mansour: Yeah. Uncomfortable at first.
Sam Mansour: Yeah. But practicing those questions in that group setting makes it feel more normal to you. And then a senior level person isn't saying, hey, don't ask that question. You feel okay? It's probably a good question to ask. And then I would prepare the questions in advance. I definitely think this would help improve inquiries. You know, if you go in [00:18:30] to an inquiry and you're just like winging it, but, you know, you need to understand, let's say internal controls related to cash reconciliations going in cold with no questions prepared in advance. Maybe it seems more like natural and confident. Um, but at the same time, I think it could be very unprofessional. Um, you want to try to have some questions prepared that maybe you, you know, we've done the audit in the past and we have some history [00:19:00] here, and we want to double check some things. We want to check in on some things. Maybe it's a new client or an existing client. And we know something about the industry, something common in the industry. So we want to inquire about it. Um, and maybe we just want to have some generic questions on hand. Um, because sometimes you get into an inquiry with a client and maybe it's stressful, maybe they're not giving you, maybe they're not being as responsive as you want. Maybe they're just answering very quickly and very short to the questions. And so you're not able to really get an understanding. [00:19:30] And so at least if you had kind of a list of questions that you had prepared, it would help you kind of go back to that list and say, okay, let me check on this.
Sam Mansour: Let me check on this. So at least when you walk away from that inquiry, you have achieved your goal of asking the right questions, because the last thing that you want to do is go in there, be intimidated by the client, which I think can happen a lot to especially entry level auditors, and then have to come back again later and continue asking them more questions around that [00:20:00] same subject. Right. I think it just heightens the level of anxiety, frustration, and if there is something wrong at the client, let's say bad controls, bad processes, and you're coming back to ask them about it, that's typically when they get, you know, really defensive, really frustrated with you. And and even though it's it's not necessarily your fault, they might go, you know, complain to the audit partner or something and say, hey, you know, like, why is your person interrupting my day so much? Why are they, [00:20:30] um, coming asking me again? And then the audit partner might ask the team member, hey, why are you meeting with this person 2 or 3 times on the same subject? And it could simply be because you didn't. You weren't prepared enough going into that the first time, and then your excuse in your mind is like, well, this person is kind of uncooperative and so I don't know what to do.
Abdullah Mansour: Yeah, that totally makes sense.
Sam Mansour: And then I would probably say, you know, last point here is most importantly, listen actively. [00:21:00] Um, and let silence do the work. I think this is a super important and very overlooked area. A lot of people, again, especially newer team members, don't like silence, right? So if you ask a question, you just sit there and look at them. It's like, this is really awkward. You know, I'm the new person here. I need to fill in the gaps. And so then we'll rush to the next question. We'll rush to fill in the gap ourselves, and we won't just let the [00:21:30] silence do the work. Um, clients often fill the space with valuable content. So if if you ask a question and you and you kind of give room for pause, then typically they might feel a little bit uncomfortable that there is a pause, and then they will start giving you willingly more information on a certain subject. So don't be super quick to fill the gaps to fill the silence. Let them do it. So again, you know, I would say three big [00:22:00] things. One on how to how to improve your inquiry skills one practice, practice, practice, role play practice and role play. Okay. Number two, prepare your questions in advance. Um, some people take pride in not being prepared because they operate like they act like they're experts in the subject.
Abdullah Mansour: But yeah.
Sam Mansour: I don't think they I don't think that ever really makes a lot of sense. And then and then most importantly, um, listen actively and leave some space, leave some room for them to fill in the gaps. Don't constantly fill it in for [00:22:30] them.
Abdullah Mansour: Yeah, that makes sense. And the last one totally makes sense. That kind of goes back to we're talking about at the beginning of the podcast, this episode where we mentioned, don't don't cut your client off to just let them continue to speak. So it's kind of along the same lines, and I think that's a very valuable one. And what about body language and tone? How do those come into play? I'm assuming that's kind of you're having a conversation with them. I'm assuming those are pretty big pieces to that.
Sam Mansour: Yeah, I mean absolutely. Um, and those are two huge areas. [00:23:00] Um, and if you think about it, if someone walks in and they cross their arms, you know, when you're when you're standing and talking to them and they kind of put on more of like a, almost like a kind of like a frowny un unpleasant face. They're not really smiling and they're, you know, they kind of feel like they're towering over you a little bit. That body language is and they give short answers. That body language and tone definitely kind of gives you the feeling that they're unapproachable. So for you as [00:23:30] an auditor, you want to be as approachable as possible, but also while maintaining a professional, um, attitude. You don't want to become their best friend in the whole wide world because then if you have to ride them up for a finding or communicate bad news in the future, you might feel concerned to do that because you're their best friend. The other thing is, if you're if you're too friendly and too, you know, and too, too approachable with them, maybe you don't ask the hard questions because it kind of kills the [00:24:00] vibe in the conversation.
Sam Mansour: So I think the tone should be professional but approachable. So again, key here is professional but approachable. And then clients need to need to feel comfortable opening up. So they need to feel comfortable talking to you. Um, so you need to kind of, you know, you need to kind of let it flow a little bit. Um, you need to be patient. You need to be, um, I think the key, again, the key thing here is approachable but professional. You know, you come in, you say, you know, you ask them about their weekend, you check in with them. Hey, is this a good time to meet with you? Yes. Okay. [00:24:30] I need to talk to you about cash reconciliations and get some, you know, some understanding about that. Um, but before I jump in, you know, do you have any questions for me about the audit? I think, like, seeing where they're at with everything, giving them the opportunity to kind of say, yeah, you know, I was I was wondering why you guys were doing this and this and that. And, you know, then you kind of throw them a bone a little bit. They feel good about that.
Abdullah Mansour: Yeah. Yeah.
Sam Mansour: And then I would definitely avoid sounding accusatory. We're there to understand, not interrogate, [00:25:00] especially in, in the, um, in the inquiries. I remember a staff person, we were out on a pretty big client, and the staff person came into the conference room where we were all sitting, and this person said, um, well, I know we have a finding in this area. I know, I know, I know, I know there's a problem here. And I said, well, you know, can you close the door? And this person was like, yeah, I mean, they're doing it this way and this way and this way, and it's just completely wrong. And we have a problem. And this client was fairly clean. [00:25:30] You know, it was surprising to me that, that, you know, they would actually have a gap in this, this specific area that this person was, was um, looking at and the staff person really kind of forgot about compensating controls and other procedures that the client had in place that kind of filled the gap, and they actually didn't have a problem. But what I had learned later was, you know, talking with the client because I, you know, had known them for a few years. Is that that staff [00:26:00] person, when they were doing the inquiries, they were coming off as a little arrogant and accusatory, kind of like, you're not doing it that way, you know?
Abdullah Mansour: But yeah.
Sam Mansour: You should be, uh, and that kind of kills the conversation really quick, right?
Abdullah Mansour: Oh. I'm sure. And being accusatory doesn't fall along with what you said earlier or not, but you said earlier that you should go in as if you're trying to start in a new job. Right? And if you're doing that, you probably wouldn't be accusatory. You'd be there to learn and you'd be curious and try to understand [00:26:30] what's happening. So that kind of aligns with what your your earlier point. So I like that a lot. That's a great one.
Sam Mansour: Yeah 100% because yeah if you're there to learn um and not interrogate them. The tone should absolutely be one that comes from a true, genuine perspective of wanting to learn, not wanting to judge how they're doing things because every organization is different. Um, yes. There is kind of a perfect standard out there for a lot of things, [00:27:00] but very rarely does life work that way. So judging them and being accusatory of them is, you know, if they if they get that vibe from you, um, it's really it's really damaging to the inquiries. And I've been around a lot of auditors where they kind of take that approach and they're just not successful in auditing because they come off as too unapproachable, too abrasive, too judgmental. Even though we are the auditors and even though we are coming [00:27:30] into, I don't want to say scrutinize, but we're coming in to check their work.
Abdullah Mansour: Oh, sure. Yeah.
Sam Mansour: We're not better than them. We're just people. And we're here to do a job, and they're trying to do their job, and they're stressed out that we're coming in and they're doing things for whatever reasons that they are, and we have to try to understand them and and make sure that we're empathetic to what was going on, but also do our jobs. And if there is an issue, then we're going to write it up. So, you know, another thing, when it comes to the body language, you also want to maintain eye contact [00:28:00] and show genuine curiosity. I think showing genuine curiosity is huge, because if you're just sitting there to fill out a checklist and you're just checking box after box after box, they get the feeling that like, I mean, a robot could probably ask these questions, right? You.
Abdullah Mansour: Yeah. It would make me very nervous, too, if someone came in and into my company or the company I work at and just don't make eye contact, and they're just very accusatory. I'd be very, very much on the defense. [00:28:30] Or I could see how that would I wouldn't be as willing to answer your questions in a manner that gives you all the context, maybe so that that totally makes sense.
Sam Mansour: Yeah. So kind of it kind of helps build that. I would say more personal relationship and interaction with them being more genuine, more curious. Um, I'm sure you've been around people like that, you know, in your career where they, um, will ask you questions and they really want to know what's going on with you. You know, they really want to understand how's [00:29:00] your job going, you know, what are you doing? How are things changing for you? You know, and there's other people that feels genuine. Exactly. And that's what they just ask because they're just like like, hey, thanks for inviting me over for dinner. How's the weather?
Abdullah Mansour: Yeah, I just have to. Yeah, yeah. They feel like they have to ask it, so they just throw it out there. Well, can you give us an example of an inquiry that led to a major insight?
Sam Mansour: Yeah. I mean, um, so and I [00:29:30] think there's, you know, there's a, there's a few. So it's kind of hard to maybe pick one. Um.
Abdullah Mansour: I'm sure, yeah, I'm sure you have. I'm sure you have a lot in your, in your career.
Sam Mansour: But yeah. So so there was a controller once that walked me through the revenue recognition process and midway through they casually mentioned a manual journal entry. Um, they made at year end to true, up to true things up that the comment led to further testing and uncovered improper, improper revenue recognition. So if I hadn't asked that open ended [00:30:00] question, we wouldn't we would have missed it. So when I said, you know, walk me through revenue recognition, sometimes revenue recognition, depending on, you know, the person in accounting and depending on the industry that you're in and the standards that you're subject to could kind of be, you know, maybe an area that maybe, you know, you might make some mistakes in. Might be easy to kind of, you know, book things incorrectly there. And so when they said they were booking a manual entry to true things up, I kind of thought, well, why would they be, you know, doing that. And [00:30:30] what was the purpose of that entry? And so I said, hey, you know, let me take a look at that. Uh, let me understand a little bit better. You know, what are you trying to do here? And and it led to some, some technical issues that they were having. But it started out with could you walk me through this area. And then their comment was I do these manual entries. And so then of course I latched on to that. And then it's nice when if you have like a notepad or something because you could just write on there, you know, like off to the side manual entries or something that kind of sticks out [00:31:00] to you. And then once they've finished again, could let them talk, let them fill in the voids.
Sam Mansour: You don't want to stop them and say, show me that journal entry. Right. You want them to just keep going. So let them keep going. But then remember that you're going to come back to certain things. And maybe it's 2 or 3 things. And in this case it was that manual entry. And so it was easy to come back to that because um, you know, it's something that they had talked about, they had pointed out. And, you know, it's interesting because it kind of reminds me a little bit of like a, [00:31:30] like a murder mystery, right, where you're trying to figure out what's wrong, who did it. And you and you want to try to be very versatile, very, um, open in the scenario right where you are kind of that you are the detective, but you want to kind of leave like a blank slate for people to kind of paint that picture for you instead of you trying to force it in a certain direction. And that's where you say, walk me through it, show me what you're doing, explain [00:32:00] this to me. And then you just kind of keep asking questions, but you let them keep painting that from like a, um, you know, in an inquiry format. So they're explaining it to you. Think of it that way, explaining it. You want them to explain it, and sometimes you'll encounter some people who are just not as chatty. Right? I met a lot of people where they're just they don't like giving a lot of detail. That's just kind of their personality.
Abdullah Mansour: And yeah, and sometimes you have to their job and they're like, here's [00:32:30] your information. Let's move on.
Sam Mansour: Yeah. And so maybe you have to go to other people in the organization to kind of better understand, you know, what's going on. So you have to be strategic sometimes inquiries in a certain direction, like, let's just say you keep pounding your head, you're doing all the right things in a very specific direction with a specific person, with a specific series of questions. It's just not working. You have to be open to pivoting, right? So you can't be so rigid in just going down one lane with one person. [00:33:00] So again, if they're not very open to talking, you might want to say, okay, I need to maybe stop here. Either go collect information and come back to them and be very, very specific or ask other people around them.
Abdullah Mansour: Um, yeah.
Sam Mansour: Or obtain like a different understanding from other sources, whether it's documentation, policies and procedures, other people. And then I could come back to them and maybe I don't need to um, there's other people that are just really chatty. And so some I found [00:33:30] that some people during the inquiry process, like the clients, some people like to almost flood you with information and.
Abdullah Mansour: That's too much.
Sam Mansour: Yeah, and that sometimes can be more damaging, I think, than limited information. Because if they're not.
Abdullah Mansour: Saying.
Sam Mansour: A lot, you can latch on to some key things. If they're saying a lot of stuff, they're just like just filling you with not, you know, with with information. Maybe it's just that there is a lot of information. Maybe [00:34:00] they're covering too many areas. And so what I typically like to do is say, okay, hang on, stop, stop, stop. Like this is really quick for me.
Abdullah Mansour: Yeah.
Sam Mansour: Let's go back to this specific point. So can you explain to me in more detail how exactly this works? Right. So sometimes you kind of have to rein them in if they're more on the chatty side.
Abdullah Mansour: Kind of slow them down a little bit.
Sam Mansour: Yeah. Don't be afraid to control the conversation a little bit in that sense and lead them. You [00:34:30] know you're kind of their guide, right? You want them to go down a certain path. You want them to stick to a certain subject, and maybe they maybe they're avoiding it because they find it uncomfortable, because it's there's some issues there. Um, and maybe that's just who they are as a person. Maybe they're just chatty. We don't know yet.
Abdullah Mansour: Yeah, that sounds great. Back to the initial, uh, story you gave about how you uncovered that the the major insight. It sounds like the one good question. Changed the whole engagement, essentially.
Sam Mansour: Yeah. I mean, [00:35:00] maybe not the whole thing completely, but but a big a big chunk of it, which, I mean, you know, uh, revenue revenue recognition is a pretty key thing. And there are a lot of key areas. So, um, yeah, you know, you could go from a very clean and smooth engagement to something that's maybe a little bit more, you know, messy, some more problems along the way. And, um, and asking some strategic questions can really like, you know, unlock some [00:35:30] interesting things. So it's very important to uncover.
Abdullah Mansour: Yeah. Yeah. Well, what do like, what are partners and managers? What role do they play in modeling strong inquiry techniques? I'm assuming it's a pretty big part of of a firm. You know, I'm sure they're the they're like the models of the firm. I would assume so. How how do they play a role there.
Sam Mansour: Yeah. I mean they're definitely you know, the team is the team is watching them, [00:36:00] right? They're they're listening. I remember when, um, when I was kind of, you know, earlier in my career and there would be a part of our audit partner at the head of the table, and the client would come in and talk to them. Um, everyone would would, like, pay attention. Right. It was all eyes are typically on those types of conversations because, you know, typically the conversation between the partner and or the manager and the client are fairly high level and maybe related to some more sophisticated [00:36:30] or important things. And so, you know, I think it's really important that they that they keep in their minds managers and partners that they're essentially leading by example. Um, and so, so, so, you know, refining it's, it's, it's a never ending pursuit, in my opinion, to get better at asking questions and doing inquiries. Inquiries. I mean, if you were a detective, you would probably be pretty good at asking questions. You'd be much better probably than an, you know, an accountant [00:37:00] or CPA that went to school, got their accounting degree, and now they're in auditing. And maybe if you're some kind of high level FBI agent, you'd probably be better than a detective, you know, working at a local police station.
Sam Mansour: So there's there's always like these, like, levels of, um, of skill. And so for a partner or manager to, to think that they've achieved the highest level of skill in this field, I think is, is somewhat unrealistic. Um, the other thing is there's a lot of risk of [00:37:30] fraud that exists, even though a lot of our engagements aren't necessarily designed to focus on finding fraud. Better questions, better audit procedures can lead to uncovering some really, really critical things out there. And the better. Interview. Interviewer. Interviewer. You are the better you are asking questions. The more skilled you are at creating a, you know, a an open, cooperative and friendly environment, the more results you're going to get out of, you know, that audit that [00:38:00] you're conducting. So it's not just because you're an audit partner or manager doesn't mean that it's something that you should stop getting better at. I have personally focused a lot on trying to like, read audiobooks, um, or, you know, basically physical books or audiobooks that, that help me get better at certain things. And one of those is, you know, a track for me has been how do you ask good questions? How do you how do you how do you efficiently collect information [00:38:30] from people because think about it, even outside of the audit process, being able to uncover key details in your personal life, professional life at the client, in your own organization.
Sam Mansour: I mean, it's just so critical. Asking good questions. Um, you know, it's such a big thing in life for anybody, for any, you know, if you have kids and you want to understand what's going on and what, you know, how how their lives are going, you're going to ask them questions and communicate with them in a different way than you would an adult. And if you're [00:39:00] meeting up with your friends and you want to get to know them better, there's a different way that you do that. And if you're at a clients and you're being professional but approachable, there's a different way of that. So what I'm trying to say is it's a it's a in my opinion, it's a never ending journey. And the team is looking at those partners and managers as the standard for how these inquiries should go. So so you should always be continuing to improve. Unfortunately I don't think there's a lot of like great CPE out there [00:39:30] on on the skill of, you know, strong inquiries and asking questions and things like that. So sometimes we have to look outside of those traditional resources to enhance our skills. And I think it's a skill that will benefit us well beyond just a profession.
Abdullah Mansour: Yeah, it sounds very basic, but it also sounds like it's a skill that comes with time and practice. And it just it's a it's a very good skill to learn and have.
Sam Mansour: Yeah, absolutely. I mean, I think it can be overlooked too. [00:40:00] And I think it's well or at least you get a couple of years in, you feel comfortable and you're just like, ah, whatever, I'm a natural at it, but I don't.
Abdullah Mansour: Yeah. Yeah. Yeah. Well, it's been a great episode. Sam, any final tips for our listeners?
Sam Mansour: Um, I mean, just, you know, be approachable, but be professional. I think that is two really big things that I would focus on. Um, if you're not professional, it makes it just. I think it really derails the [00:40:30] the inquiries. If you're not approachable, it also derails the inquiries. So you really need to be sharp, professional and then highly approachable to them so that they feel comfortable asking you questions. Um, they feel like they can come to you even outside of the inquiries and to fill and fill in gaps, maybe. Or if they come up with additional information, they want to share it with you. So the the being a professional and approachable, um, are just two extremely, extremely important things that [00:41:00] I would just, you know, put in your head and just think, you know, think about those very frequently.
Abdullah Mansour: Yeah. Awesome. Well, excellent advice as always, Sam. That wraps up our episode of Audit Smarter. Join us next time as we tackle time budgets, why audits go over and how to get them back under control. See you then. Thanks for listening.