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Quarterly: Winter 2019 - Brittany Winters and Ty Elliott

The value of criteria

By Brittany Winters and Ty Elliott

The highest call of the internal auditor is objectivity. To maintain this standard of work, auditors rigorously research the appropriate criteria by which to compare their “client’s” situation and make high-quality recommendations for improvement. However, things are not always as they seem. After all, what precisely constitutes “best practices” or “appropriate” criteria?



In his book entitled Administrative Behavior 1, Herbert Simon defines the distinction between “values” and “facts” with the comparison of “ought’s” and “is’s”. To elaborate, a value is a statement of how things “should be” while a fact is a statement of how something “is”, and one can make a decision based on comparing these two elements. To the auditor, this process should sound familiar. It is well established that the elements of a finding include selecting criteria, identifying the condition, and then comparing them. What may not be familiar is the implication of where this leads auditors. Selecting criteria is selecting what “should be”; therefore, selecting criteria is inherently selecting a set of “values”.

One might argue that certain criteria, such as “financial statements should be free from material errors,” are objectively established and do not constitute a value statement. This seems true on the surface level, but further consideration of the proposed example will illuminate the issue.

  1. Financial statements should be free from material error.

  2. Having financial statements that are correct results in higher bond ratings.

  3. Higher bond ratings lend assurance to investors that a particular investment is a good choice.

  4. Investors value assurance.

The criteria of requiring that financial statements be free of material errors was established because investors value assurance that their choices are good.

As one can see, even criteria that seem inherently objective are still statements of how things “ought to be” and are rooted in a statement about what someone, somewhere values.



What does this mean for the audit professional? In short, it means that there is no way to avoid establishing a set of values in the audit process, as the standards themselves require the selection of criteria. With this understanding established, there are a few nuances to work out for varying subsets of the profession.

External auditors and consultants (who work in a similar capacity) have the option, or perhaps the requirement, to adopt the value system of their client. There are often specific objectives that the client requests these professionals to assess during the project as well as the values embedded in the client organizations’ policies if they are serving as criteria. Consulting agencies or external auditors may claim that they do not consult with their clients about expectations or values for their assessments, rather they follow their internally established norms and processes. However, this line of thinking precludes the fact that the client organization selected the external agency based on their work reputation. It is unlikely that a client organization will request the assistance of an agency that they feel is misaligned with their organization’s mission, goals, or objectives; hence there is a large component of “value matching” in this selection process. A simple way to think about it is that the client thought about which agency they should choose to conduct the analysis and based their selection on that agencies’ ability to deliver insights they deem valuable. That said, external agents do not need to consider as closely the implications of the criteria, or value set, under which they are operating so long as the understanding is present that they have indeed selected a value set – albeit one that aligns with their client.

Internal auditors, on the other hand—particularly independent ones—must take this consideration much more seriously. In the interest of independence, internal auditors may research “best practices” or innovative solutions of the fields they are considering rather than relying only on the standards of their own organization. The risk in this process becomes the reasons for which an auditor selects particular criteria over others as the gold standard. If these standards differ from the current policies and procedures of their organization, are they imposing their own value set (as defined by the criteria) upon the organization? If so, is this an instance of bias for particular values (e.g. efficiency, equity) over others? There is potential for saying that the auditors personal value set will align with that of the organization (otherwise they would not have been hired) but this is not always the case, especially in times of volatile political climates or high management turnover.



The most important takeaway from this article is to recognize that criteria is, essentially, a reflection of someone’s values. Therefore, it is up to the auditor to think critically about whose values they are using to establish the criteria. In the case of government auditors, some specific sources of value sets are:

  1. Personal values – audit managers and individual staff;

  2. Institutional values – management, audit committees, and councils;

  3. Professional values – The Institute of Internal Auditors, ALGA, GAO; and

  4. Community values – the population served by the organization.



If your criteria are selected based on personal values, you may need to reevaluate your processes for appropriateness and potential bias. If your organization insists on particular values, objectives, or best practices (irrespective of community values), you should consider whether the values they imply adhere to the values extolled by the profession. If the inherent values match, the values may be deemed acceptable. If they do not match, and are a stipulation of your position, it may be the time to consider a new employer. In this case, it may be prudent to identify that organization among your peers as one that enforces a particular value set so that any new auditors are not caught unaware. Alternatively, it may be possible for you to change the values and expectations over time from within the organization and bring them into agreement with the professional standards.

If you are selecting based on community values and they match with the professional values, this is probably a positive situation (provided the institutional values are not in conflict). If the community values are reflected by the institution, but still appear to be conflict with professional standards, it may be especially prudent to question how these values impact minority opinions within your community and whether those values are appropriate for adoption.



In order to provide objective analysis and impart high-quality advice, auditors must make the determination about how things ought to be in ideal circumstances. In making this determination, the auditor is selecting a standard of comparison that reflects which things they value in any given organization, process, system, or service. Regardless of which value set is given primacy at the end, it is important for auditors to think critically through these considerations and be fully informed about the choices they are making in selecting criteria. If we value the legitimacy of our profession, such a condition must be met.



1 Simon, Herbert A. Administrative Behavior: a Study of Decision-Making Processes in Administrative Organization. 4th ed. (New York, NY: Macmillan, 1997) 55-57.



Brittany Winters is new to the profession and has worked for the City of College Station Internal Audit office for five months. She holds a Bachelor of Business Administration in Economics and Finance from Baylor University through the Baylor Business Fellows, and is currently in her second year at the Bush School of Government and Public Service for a Master of Public Service and Administration in Public Policy Analysis.

Ty Elliott has been the Chief Audit Executive for the City of College Station, TX for over 12 years. He is a Certified Internal Auditor, Certified Fraud Examiner, and Certified Government Auditing Professional. He holds a Master of Public Administration and a Bachelor of Science in Finance, both from Brigham Young University.