BY: SIO NAIDOO | PRODUCT MANAGER, ASIA PACIFIC | WOLTERS KLUWER TEAMMATE

The Power of Storytelling in Audit

More than ever, audit departments need to drive action by stakeholders. Audit departments need to cut through the noise, prompt action, and add value. Story telling makes an audience think and feel, and speaks in ways that numbers, or data alone cannot

Why should storytelling matter to audit departments?

Storytelling is essential as a part of the toolkit of modern business leaders. Stories can spark an emotional reaction and therefore they are memorable. Auditors can use storytelling to increase their impact in organisations.

Management studies tell a story of Lucille Burger, a young security guard who asked Tom Watson¹, then the CEO, and founder of IBM to show his security badge before entering an area of a high-security plant. Tom was accompanied by senior executives, who urged the guard to let Mr. Watson enter without the badge, given his position.  Tom, however, complied with the request and sent for someone back to go back and bring his badge, because his belief was: “We make the rules, we keep ‘em”.  Tom showed that no one was immune to the policy while demonstrating the values that are still honoured by IBM today “respect for individuals” and “pursuit of excellence.”  This story has become a cultural artefact at IBM.

This is a great compliance audit story as it helps reinforce a culture of compliance with controls.  It reminds an organisation of its values, and that it is equally important that the actions of both senior and junior staff demonstrate these values, every day.  Stories really do have a significant have a significant impact.

How can Internal Audit harness the power of storytelling, in a world of greater and growing business complexity?

A story that accompanies a report, can improve and grow authentic stakeholder engagement to ensure stakeholders adopt the recommendations.

Auditors will have to collect stories from their industry and there are several sources of corporate stories like Tom’s. Whilst you can review and retell stories of other organisations as you begin to adopt storytelling, you will also find your own corporate stories during your journey, which will help strengthen the impact of your discussion and drive action.

To fully unlock the power of storytelling in audit within a storytelling framework, auditors will need the right tools and technology to find the right story to tell.

The following outlines an auditor’s storytelling framework:

1. Leverage technology to find facts and develop insights
2. Structure a simple, strong story
3. Be memorable

1. Leverage technology to find facts and develop insights

In storytelling, credibility matters. This credibility is based on auditors building a story around the complete situation.  

Suppose our fictitious character Amy Li is the auditor at a large consulting company, based in Singapore where each one of 500 consultants is issued with a corporate credit card. To reduce the administrative burden on managers, credit card transactions below SING$50 are auto-approved. This is a time when executives are seeing a global economic downturn, so the company is under pressure to manage expenses.  Business management is already aware of the risks presented by credit cards and the risk of fraud. If Amy relies on sample testing of credit card transactions, she may draw an incorrect conclusion of the controls and fraud risk for the population. The story that would be told would be incomplete.

If Amy used a data analytics tool to analyse the entire population, the story would be based on the “full picture”. Amy uses Benford’s Analysis to identify spikes in transactions just below $50 (i.e $49, $48…) across all credit card holders, who may be acting fraudulently. The total of these transactions avoiding scrutiny is now a significant portion of expenses negatively impacting EBITDA. When Amy presents this to business management, her story based on all the facts clearly show that staff are exploiting a loophole in the control environment.  

Auditors need the right tools and technology to uncover the facts and build a strong foundation for a story.  Stories are valuable to emphasise the facts and make them more relatable.  There is undeniable value of data analytics which can be seen in research from Gartner² showing that a business is 70% more likely to take action on data-driven insights.

2. Structure a simple, strong story

Stories can be developed by either leveraging your own experience or the experience of others, which supports your facts, and the recommendations that you want management to adopt.

Within the story use simple, relatable language. If you are not telling a story from your own experience or someone else’s. You can tell a folktale, or invent a story, but you must be honest with the audience, to keep your credibility intact. For an audit story, there should be a strong narrative that includes a background or context, action, and a result.

A story could make references to previous findings or behaviour, and how the organisation reacted to this, which strengthens the current story. If an organisation reacted in a certain way previously and now, we are following a similar path as we did previously, where are we likely to land?   This is where other data sources within the organisation can be leveraged, to help strengthen the existing narrative.

Years ago, Proctor and Gamble had a clean desk policy initiative, designed to keep confidential documents secure and “off desks” years ago, and more importantly, unattended at the shared printers. Whilst many solutions were offered, ranging from a memo from the CEO to a competition for “the cleanest desk”. Martin Hettich, now VP at P&G¹, suggested implementing a pin code for printers. This means you had to enter your code to retrieve your printing and allocate a cost to the department budget. He had implemented this in his Panama office, initially aimed at reducing paper wastage, but now also almost eliminated abandoned possibly confidential pages sitting on the printers.  

This story can be told by auditors, to present the need for a strong compliance environment and risk-managing culture. This can be included as a thematic addition to the audit report’s executive summary that sets the tone and scene for management to change the control environment that will force changes in behaviour. This would be more impactful that any recommendation having management update a work practices policy.

Audit technology can help easily navigate and track past recommendations or time taken to implement them, and who was better to be charged with managing a certain business area recommendation.  What were the unintended consequences of the previous action, just like Martin’s suggestion could be the insights that could be woven into a memorable narrative?

3. Be memorable

Cognitive psychologist, Jerome Bruner suggests we are 22 times more likely to remember a fact when it is wrapped in a story.  Auditors will find their voice and leverage language to tell a story that resonates with their audience.  

Strong metaphors make a story memorable. Many years ago, when Scott Ford, then outgoing CEO Alltell Corporation¹ was asked to present his thoughts on running the business to the new owners who  were private equity partners from a New York office, one of the two slides he presented was of a New York City yellow cab. 

Scott knew that the new owners, only bought this business intending to wait for a bigger telecommunications player to come along and buy them out for a profit. In New York City, when you hail a cab and ones pulls up, you better get in as you won’t know when another one will come along.  The cab on the slide was a metaphor for opportunities presenting themselves. Scott believed that for this company, buyers would be few and far in-between, so his message was “when one comes along, you’d better take it”.

Auditors can tell this story, or use this metaphor, when telling stories around the opportunity to fix a time-critical issue, perhaps when there is a window to achieve compliance. Once that window closes, you will face consequences so you must act swiftly. When drafting the audit report and presenting the audit findings, auditors can use stories that centre on a metaphor, like the yellow cab that will resonates with the audience or a real-life story like Tom Watson’s that drives management into adopting the audit recommendations.

Reinforcing recommendations with storytelling, captivates audiences, and takes them on the journey. The power of a story that demonstrates meaning or moral lies in its ability to spurs action, and this is will allow auditors to have a greater impact within organisations. Auditors have an audience, hungry for story, willing to listen, eager to act.

An audit department that leverages technology will tell powerful stories and lead stakeholders to take action. Storytelling will be a core competency amongst leading audit departments of the future.

References:

1. Lead with a Story, Paul Smith, 2012
2. Gartner Audit Driven Insights Model, 2019