Why interview skills are important during audit?

Introduction

As an auditor who needs to conduct the audit as per the auditing standards prescribed by ICAI, it is important for the auditor to have proper planning of the audit, execution and collecting of evidences as per the audit plan and reporting the findings to the management or Those Charged with Governance.

As per Auditing Standard SA 315 – Identifying and Assessing the risk of material misstatement through understanding the entity and its environment, there can be various methods to understand the entity. It can be done by performing analytical procedures, observation and inspection of books or inquiries from the management, appropriate individuals or the person who are likely to have sufficient information.

Similarly, while collecting audit evidences as per Auditing Standard SA 500 Audit Evidence, where the main emphasis is to collect sufficient appropriate audit evidence, the audit procedure which is required to be performed by the auditor, inquiry provides an important audit evidence in collaboration with other audit procedures like analytical procedures, observation, recalculation, confirmation etc.

Interview thus becomes a critical part of risk assessment for the auditor. Knowing how to conduct an effective interview and help the auditor to gather many information which later can be corroborated with other audit procedures. It is important to structure the interview and be well prepared before conducting an interview.

How to conduct an effective interview?

An effective interview is essential for gathering facts and steering the audit in the right direction. The key issues can be easily identified through interviewing the right person. It helps the auditor to evaluate to decide on the documents to be reviewed, computer databases to be checked and other important evidences to be collected.

Interviews are used to obtain information about and to understand the entity and to verify facts. These may take the form of formal or informal interviews.

For formal interviews, notes were taken and/or recordings were made. In some instances, the person is asked to sign the interview notes. If the interview is of importance, the interviewee is informed that he or she would possibly have to confirm his or her statement at a later date.

The audit team also conducts numerous informal interviews to collect information relating to documents and activities. Informal interviews were not recorded although hand written notes may be taken. These interviews are conducted for obtaining background information, understanding the nature of the entity, obtaining background information to conduct the audit.

Some of the information which can be obtained through interview could be information regarding the personal background, interpersonal relationships in the organization / entity and unearth the collusions between the employees.

Skills required for conducting effective interview

To be successful, an interview should be thorough. It requires strategic planning, relevant questions and an objective interviewer.

1. Active listener and active observer: The term “active listening” not only means listening more that talking, but it also means the ability to read between the lines and how it is being communicated. Sometimes what is not being said is equally important as what has been said by the interviewee. To be a good observer, it is recommended that one person is being interviewed at a time.
2. Professional demeanor: Professionalism is very important during the interview process. Professionalism is a must during the audit interview process. The auditors must maintain the position of a disinterested third party. This means if nerves get the best of you, and you try to use humour to relieve the tension, the auditors may quickly try to redirect your attention to the questions, and suggestions to hold the interview over a business dinner may be refused.
3. Body language and appearance: The auditor has to be careful regarding the demeanor of the interview. Aggressive body language or the tone of the interview has to be avoided. The confidential sources of obtaining the evidences should not be disclosed to the interviewee. Appearance of becoming too familiar with the interviewee may cast doubt on the interview process. Observed behaviours such as smirking, sarcasm, evasiveness and rigid body posture may suggest dishonesty and impugn the credibility of the auditor.

Interview & Interrogation

When major problems are found in the company records and the auditors feel they are not hearing the whole story from owners and management, they may resort to turning the interview into an interrogation. An interrogation creates more pressure on the interviewees to provide information they may be reluctant to reveal and may sound more accusatory than inquisitive. However, the dividing line between interviews and interrogation is always clear. Interviewers are expected to be prepared for wide variety of circumstances during the audit.

Documenting an interview

Written records of an interview should be prepared as soon as possible. The auditor has to retain the original notes for further verification. The interview document should ideally contain date, time, location and person present during the interview. An interview log is good way of recording the time of significant events during the interview. If possible, the details noted should be also be confirmed by the interviewee if the interview is considered to be significant audit evidence.

Closing of interview

During the closing of interview, the auditor should try to close the interview with a positive note and leave the door open for additional contact. The facts obtained during the interview should be summarized and the interviewee should be encouraged to say whatever he/ she desires.