My first audit job was John Brown Engineering. Sadly no longer with us, in the eighties the company made gas turbines. It used to make ships. The QE2 was built in the John Brown yard in 1967. The leader of our audit team had been taken to the launch as a little girl. When I audited it, the company made just the turbines that had once powered the ships.
The John Brown audit was also the first for my firm, having just landed the client. No one on the audit team knew anything about the company. As a result, I had much more freedom than would be normal for a first year on his first audit.
One of my audit tests was to match sales invoices to shipping notes. The shipping department was at the other end of the factory from the administrative offices. It was a 15-minute walk through the whole manufacturing process, starting with completed turbines being commissioned and finishing up where they fabricated the steel frames the turbines were housed in. The different sights and smells as I walked through that factory stay have stayed with me these last 30 years.
The shipping department consisted of an outer office with three clerks and an inner office where the shipping manager sat. When I arrived, the shipping manager ushered me in. From the way he was acting I could tell he thought I was someone important, even though I was only twenty, and my presence was unsettling. I formed the impression it was a rare event for an auditor to make his way to this corner of the building.
I explained that I had a sales invoice and would like to see the associated shipping documentation which I understood to be in the Lever Arch file. He took me to the outer office and gestured towards the far wall which from floor to ceiling was covered in files. ‘Which one?’ he said. Not wishing him to think I was a pushover I gave him a look and in a sharp voice said ‘The Lever Arch one.’ He looked confused and replied ‘They are all lever arch files’. Reader, I didn’t know what a lever arch file was. I assumed ‘Lever Arch’ must be a type of shipping method. I did know it referred to a type of stationery.
This is what auditing is like. Most of the time, you have no idea what is going on. You are dealing with people who have worked for a company for years while you are there for a few days.
My favourite auditing task was stock-taking. It gives real insight into the heart of the business. My favourite stocktake was at a bus company. Standing on top of the depot roof, I counted the number of buses in the yard. It wasn’t difficult. My worst stock-take was at a nuts and bolts wholesaler in the early evening of 31st December. The lads had obviously started celebrating Hogmanay earlier in the day and didn’t hide their resentment at wheeling in trolleys full of nuts and bolts for me to count. Luckily for me, these were the sort of nuts and bolts used to hold buildings and bridges together. They were huge and didn’t tale long to count.
How easy or difficult an audit is depends on how well a company maintains its books. My most challenging audit was at a double-glazing manufacturer where there had been a fire earlier in the year. The company’s paper records were completely destroyed and, although their systems had been restored from a computer back-up, some data was missing. It was a chaotic situation where everyone was in jeans moving from portacabin to portacabin beside the charred remains of the offices.
My job was the bank reconciliation. Normally the most straightforward job on any audit, this one took me three weeks. As I struggled to reconcile the bank statement to the accounts, I wrote numbers all over pages and pages of notes. Over three weeks I got closer and closer, narrowing the discrepancy. Eventually, I had a Eureka moment. I discovered a number I had scribbled in the corner of one of my workings which magically accounted for the remaining reconciling difference. I was triumphant. I had solved the puzzle. My colleagues were congratulating me as I checked my figures. Only then did I realise the number I had found was a phone number I had taken down earlier that day and had nothing to do with the bank account.
We never did fully reconcile the bank account on that audit, which was a concern because in theory even a small difference in the bank reconciliation could be hiding a big problem.
My favourite auditing story comes from John Brown Engineering again. It was during a stock-take when I was waiting with a colleague for someone to show us some steel to count. In walks a worker. ‘Who are you?’ he says. ‘Auditors.’ we reply. ‘What the fuck’s an auditor?’ he asks. Not waiting for a reply, he asked ‘Do you write reports?’ ‘Yes’ we said.