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Mind of Jacka: Fill in the Blanks

Blogs Mike Jacka, CIA, CPA, CPCU, CLU Jan 12, 2023

In last week's blog, I provided a link to the latest craze, a little program called ChatGPT. I also provided the results when a user (me) entered the command "Write an internal audit report about accounts payable." The AI provided a report that was startlingly similar to some of the mediocrity we have all seen and produced during our careers as report-generating internal auditors.

I followed with the admonishment that, if our work isn't better than the work of an AI, we should start thinking about a new career. (I understand the service industry is always looking.)

Now, I'm guessing that more than a lot of you vigorously nodded your heads in agreement. But I also wonder how many of you felt the warning wasn't really needed — that the profession of internal audit recognized the challenges and would foreswear the easy road, working hard to find the next big thing.

Well, yeah some do. But, some don't.

Unfortunately, I believe that internal auditors (much like many people, professions, and pundits in the world) start with the best of intentions. Then life, the universe, and everything gets in the way, and best intentions, like this year's New Year's resolutions, succumb to the siren call of taking the easy way out.

In a recent blog regarding ChatGPT, Seth Godin included the following sentence. "Technology begins by making old work easier, but then it requires that new work be better." (More on this post, later.)

The use of electronic workpapers (or whatever term is currently in use) is a great example. When they first came into the world, they were a boon. When set up correctly, they relieved internal auditors of tedious tasks such as redundant calculations, copy and pasting, and even page numbering. (Seriously, this used to be a big deal. And it may still be so in some areas. If you suffer from this debilitation, I'm sorry for the loss of your time and brain cells.)

Old work was made easier.

However, how did this make any of your new work better? Did you do anything new? As you developed, implemented, or operated such workpapers, did you think about how they could be used to fundamentally change the work being done? Have you used the technology to make internal audit better? Or have you fallen into the trap of just making the work quicker?

At Farmers Insurance, we had a lot (27,000 would be a lot, wouldn't it?) of semi-independent workers in the company's employ. No need getting into what "semi-independent" meant. Suffice it to say that a lot of mom-and-pop operations were spread around the country. And that resulted in quite a few fraud investigations. The frauds were seldom large, but we were constantly investigating losses in the $1,000 to $20,000 range. Yes, small; but fraud, nonetheless. And our corporate culture did not smile fondly upon even the smallest infractions.

One problem we had was that the specific details about the fraud — details we seemed to think were important — were not always included in our reports. A coworker was a diligent advocate for using our workpapers to build a fraud-investigation-report template. Then, all the auditors would have to do was fill in those details and the report could be issued.

The issue with this (and you may already see this one coming) was that this fill-in-the-blanks approach didn't result in good reporting. All it accomplished was the recitation of details. In fact, our problem was not trying to get all the details included in the reports (a problem that was actually solved by another form we had available and could be attached to the report). Rather, the bigger problem was that our reports focused on what was found, not the root cause of how the fraud occurred or how such occurrences might be limited in the future.

The report needed to be more than a recitation of details. If we were going to provide value, we needed to think about what we wrote rather than letting the computer do the job for us. Automation was making old work easier, but we were not looking to make our new work better.

Mind you, it doesn't take technology to make us lazy — to find ways to do nothing more than fill in the blanks.

When I first started in internal audit, we would perform, at a minimum, a review of one claims office each month. And, when it came time to write the findings, the other auditors showed me the paragraphs that we used for each problematic process.

Invariably we would find that claims reserves were not set up correctly. (Not sure what that means? If you really care, you can look it up. But that's a detour even someone as digressive as me is unwilling to take.) Included in the boilerplate we wrote about reserve issues was the phrase "funds would be trapped in the system." Fast forward a year or so. During a quality assurance review by Home Office Internal Audit, the reviewer referenced that paragraph and asked a simple question. "What the heck does 'trapped in the system' mean?"

And we had no answer. (Apparently, we didn't know what claims reserves were either.) But it was much easier to write the same thing every time than think about what we were writing. As so often happens when discussing problems with report writing, these issues were rooted in the work we were (or, in these cases, were not) doing.

Earlier I called it being lazy. But it is more than that. We try to do better. But we constantly fall back into the same habits. And there is the root of much of the problem. We have developed habits which fail us. In her perceptive book, "Radical Reporting," Sara James writes:

"I'm sure you can all think of times when you have, out of habit or under pressure, created a report by selecting a standard phrase, adding a sentence your supervisor approved in a previous report, and copied boilerplate wording from your organization's intranet."

(Well, we didn't have intranet back then, but the story is the same. Continuing on.)

"After all, no one can then blame you — they're clearly acceptable in your workplace, so you risk nothing by using them. Nothing, that is, except clarity and meaningful action."

So, habits prevail. And, rather than technology being a bright and shiny light for new ways to do better work, it allows our habits to be mechanized, institutionalized, and unrecognized.

No thoughts; no results.

And, let's face it, leaning on technology — whether it be electronic workpapers, ChatGPT, or copies of previous reports — is easy. And it's easy to do the same thing over and over. And it's easy to shy away from the hard work that Godin mentions versus the work necessary to make new work better.

So that's a lot about our inability/unwillingness to change. And that is a lot about how we might fall into the trap of seeing only the partial blessings of AI.

But there is another aspect of what report writing is all about and what we should learn from AI produced reports. Join us next time to see the insights we can gain by looking more deeply at Seth Godin's quote, as well as a quote from Broadway legend, Stephen Sondheim.

Mike Jacka, CIA, CPA, CPCU, CLU

Co-founder and Chief Creative Pilot, Flying Pig Audit, Consulting, and Training Services (FPACTS), based in Phoenix.