The Grandfather Dialogues
What's an Internal Auditor, Grandfather?
by Larry Sawyer
IIA 1974



"Every week brings the internal auditor face to face with new problems;
and every problem is like a mystery that has to be solved."



What's an Internal Auditor, Grandfather? (Chapter One)

What do you do for a living, Grandfather?

I'm an internal auditor, Randy.

What's an internal auditor, Grandfather?

He's the eyes and ears of management.

You mean you're a spy?

Of course not! What gave you that idea?

But Grandfather, you said -

I know what I said. A spy goes around hiding in the shadows. He gets information by stealing it. He never lets people know what he's doing or what he's found.

Okay, Grandfather, but the spy is still using his eyes and ears.

Sure. But for a different purpose. The internal auditor uses his eyes and ears to find out what's going on. But he doesn't hide what he's doing. And he doesn't do it behind anyone's back. If he finds out that something is going wrong, he lets everyone know about it so that it can be fixed.

Who's everyone?

Usually the people who are doing it wrong and the manager for whom they're working.

What's a manager, Grandfather?

A manager is someone who gets things done.

I get things done when I strike out a batter. Am I a manager?

Not exactly, Randy. A manager gets things done through other people. Like the coach on your baseball team. He doesn't strike out the batter himself. He does it through you.

But if I'm doing something wrong, the manager would know about it. He wouldn't need anybody else to be his eyes and ears. He's got his own.

Right. But that's because he doesn't have many people to worry about. He can watch them himself, see how well they're doing, tell how good their equipment is, and see if they have enough equipment. But in the big company that I work for, there are an awful lot of people and there is an awful lot of equipment. The manager is no longer close to what's going on.

Then how does he do his managing, Grandfather?

He tells people what he wants done, and then he asks them how they're doing.

That seems like a good idea. So why does he need you, Grandfather?

Well, things don't always go the way they're supposed to, Randy.

I don't understand.

Let me put it this way. If you have a small group of people, like a baseball team, the manager knows exactly what's going on. He knows everybody's name, even the bat boys, and the popcorn salesmen, and the groundskeepers. He knows all about the training camp, and the advertising, and the batting averages. If you ask him how Sam Slugger is batting, he'll tell you right off, .319. If you tried to fool him and said Sam's batting average was .349, he'd know you were wrong because he's been watching Sam bat at every game.

Why is it so different in a company like yours, Grandfather?

Because my company is like a hundred baseball organizations all rolled into one. And much, much more complicated. The manager wouldn't be that close to what's going on.

You mean you'd go and check on the batting averages and tell the manager if they were right?

That's very good, young man. That's what an internal auditor would do.

So you check figures, huh, Grandfather?

My boy, you don't know it, but you've cut me to the quick. To imply that an internal auditor is simply a figure-checker is a low blow.

But Grandfather, you said -

I know what I said. But today, checking figures is just one small part of the internal auditor's job. There are many other things that he has to do.

You mean that there was a time when he only checked figures?

Yes, indeed, Randy. And unfortunately many internal auditors even today just check figures. Which is a shame. Because there is so much more they can do for their managers.

Has internal auditing been going on for a long time, Grandfather?

Oh, yes. Way, way back in the days of the feudal barons they realized that they needed someone they could trust to check on the work of others.

Back in the days of Richard the Lion Hearted?

Yes. And even before that. But the person who did that kind of checking was protecting his employer against errors or theft. Like a watchdog.

Is the internal auditor still a watchdog, Grandfather?

When he has to be. But he's become more than that.

How did he get to be more?

Because, Randy, there was a desperate need for him. When business became so big that the boss couldn't go around himself to find out what was going wrong, he started using the internal auditor.

Why did he pick the internal auditor?

I think it was a combination of special circumstances - of a manager who couldn't turn anywhere else and of an auditor who jumped at the chance to show what he could do.

Is there anybody special you're thinking about, Grandfather?

Maybe I am. Maybe I'm thinking of some great unknown who was able to move our profession on the road to real service to management and to lead the way for others.

Tell me about him.

Okay. Let's call him Joe. People probably called him Good Old Joe. Joe was one of the old-fashioned tick-and-checkers who had graduated high in his class in accounting school and had then come to work for this small manufacturing company.

What happened to him?

Year after year, he sat at a desk in the corner, with a green eye shade over his eyes and black cuff protectors over his sleeves, looking at columns of cold numbers to see whether they added up correctly.

That must have been pretty boring, Grandfather.

Indeed it was. But that was the way internal auditing was practiced in those days. Yet in the meantime, his company was growing bigger and bigger. Where once the company employed 500 people, it now em­ployed 10,000. The boss who could once name every employee, state the price of every machine, and know all of his customers, was now moving further and further away from the action.

How did he know what was going on, Grandfather?

By what people told him.

How did he know if it was right?

Because he'd been in the business a long time; and before the company got too big he had a pretty good idea what was right and what was wrong. If he thought something was wrong, he'd go right down to that spot and check it out himself.

Why couldn't he keep on doing that?

There came a time when he became so busy with conferences, with planning for the future, with hiring new managers, with expanding his company, and with hundreds of other matters, that he just couldn't spare the time to see things for himself.

So what happened, Grandfather?

One day he got a report from the storeroom where the company kept all the things it bought and used. Storerooms in a big company have things that are worth a lot of money.

What kinds of things, Grandfather?

Well, if it was a storeroom for a major league baseball team, for instance, it might have baseballs, gloves, bats, uniforms, caps, masks, electric carts, first-aid equipment, popcorn, hot dogs, soda pop, and many other things, by the thousands.

Boy, I'd like to get my hands on some of that.

Exactly, Randy. And so would a lot of other people. That's why things have to be stored just right and watched very carefully. That's why they have records of all the things kept in the storeroom, and that's why they have to count up all the things every once in a while to see if they still have everything that the records say they should have.

What happened to the report that the boss didn't like, Grandfather?

Well, he just didn't have time to go down to the storeroom. He knew that if he called up the storeroom manager, the manager would just repeat what he'd said in the report. And yet the boss had an uneasy feeling about that report.

Looks like the boss was in trouble, Grandfather.

He sure was. He just didn't know who to turn to.

But then his eye fell on Good Old Joe. He knew Joe was as honest as the day was long. He knew Joe was as accurate as an adding machine. He knew Joe was a fine accountant. And he knew Joe was faithful and hardworking. So he called Joe away from his desk and told him to go down to the storeroom and check out the report.

Then what happened?

A couple of days went by and finally Joe came back and walked into the boss's office. And it was a different Joe.

What do you mean, Grandfather?

He stood straight and he looked taller. There was a new light in his eye. There was a note of authority in his voice.

Why, Grandfather?

Because he'd gotten away from that desk in the corner. Because he'd been given a problem that was really worthy of his talents. Because he'd wrestled with the problem and come up with some important answers that would help his boss save money and increase profits for his company, and give him new self-respect.

How did he manage to do that?

He did it by looking beyond the figures in the report. He became more concerned with things and people than with cold numbers. And most important, he used the magic word.

What magic word?

The magic word WHY.

I don't get it, Grandfather.

Just listen and you will. Joe tossed the storeroom report on the boss's desk and said: "Boss, with conditions the way they are, you're never going to get accurate reports from the storeroom. I went to everyone who had anything to do with the storeroom and asked why the storeroom records, reports and stored items were in such bad shape, and then I looked around for myself. Here's what I found:

"There's no door on the storeroom and anybody can wander in and out and take what they please. The bins where things are kept don't have any labels on them, and different kinds of things that should be kept separately are all mixed together. Nobody has counted the items in the storeroom for over six months, and even if they did, the records that they'd check them against aren't accurate. And they aren't accurate because when things are put into the storeroom or are taken out, the records aren't being kept up to date.

"I made a brief check of some motors that cost us $50 each. There were 10 in the bin, and I was able to find out that for all of last year we only used 40 of them. But I also found out that we were just about to buy 500 more."

"Good grief," said the boss, "I'd better do something about this right away."

"I've already got things started," said Joe. "I talked it over with the manager of the storeroom and he agreed that he's got to get things fixed. When he does, he'll let me know and I'll take another look to see if the conditions are better. I told him I was going to come back there in about a week. I also talked to the head buyer and he agreed to cancel the order for the 500 motors. After I make sure that everything is taken care of, I'll let you know."

The boss looked at Old Joe - actually he was now New Joe - and the boss's jaw dropped about a mile.

"Joe," he said, "you're quite a man."

"Maybe," said Joe, "but what's more to the point, I'm quite an internal auditor."

"Joe," said the boss, with respect, "do you think you can do the same sort of job for me in other parts of the company?"

And, Joe said, "Boss, just watch me."

Hey, Grandfather, that's kind of exciting.

You bet, Randy. Internal auditing, as it should be practiced today, is a very exciting profession. Every job the internal auditor does is different. Every day brings new opportunities to help the boss and improve the company's profits. Every week brings the internal auditor face to face with new people and new problems; and every problem is like a mystery that has to be solved. He can go anywhere in the company and talk to anyone he wants to. He can bring new ideas to old departments. He can come like a fresh breeze that sweeps away the cobwebs of delay, decay, and inaction. He can turn the searchlight on tired, ineffective, inefficient methods. He can ask questions, like "why," and by asking the right questions he can get people to see for themselves what changes should be made. He's big enough and sure enough of himself so that he can compliment someone who's done a fine piece of work, and he moves around enough so that he can tell others about it so that they can try it too. When he does the kind of job he should be doing, he's treated with respect by employees, supervisors, man­agers, and officers. He gets to think like a manager, and often he gets to be a manager himself. The profession is exciting, and the opportunities for service are unlimited.

Gee, Grandfather, instead of a baseball pitcher, maybe I'll become an internal auditor when I grow up.

You could do worse, Randy, you could do much, much worse.


Audit Wisdom