Finding the Root Cause of an Issue

March 2005

Last month we learned to appreciate the grandeur and wisdom of the elements of a finding—right? If not, go back and read February’s newsletter three more times! If you still have no appreciation, write “I adore the elements of a finding” one hundred times… Sorry, sometimes the schoolmarm in me takes over!

In February’s newsletter, we worked with a simple audit issue: an accounting clerk responsible for performing cash reconciliations had left for a better job. No one had taken over her duties, so cash reconciliations had not been performed for six months. Here is a rough outline of the audit issue:

CONDITION:
Accounting has not performed any cash reconciliations for six months.

EFFECT:
The bank assessed bounced check fees of $225.

CAUSE:
No one has been assigned to perform the reconciliations.

CRITERIA:
Accounting policy number #724

RECOMMENDATION:
Perform cash reconciliations. Assign someone to the task.

So that was our first take on the finding. But are we done yet? Well, we could be… but not for this newsletter. We are going to work with these elements until we find the root cause of this problem!

We would prefer to find the root cause of the finding, eradicate the root cause, and then move on to our next project triumphant! Finding the root cause is like killing the queen fire ant in the ant mound. Yes, it is good to bump off a few fire ants here and there—but to be really effective, you have to get to her. (Yes, Amdro, your advertising works!)

By playing with the elements of a finding, you can uncover the root cause and find that queen fire ant. Finding out the root cause is always a good idea—even if you decide not to approach the finding from that direction.

Why do you need to find the root cause?

Here are three good reasons for taking the time to find the root cause:

1. You don’t want to be surprised by something serious later, especially if it pertains to an area that you have just been auditing. How embarrassing to spend two weeks on an audit only to find out later that you missed something bigger and more significant right under your nose! If the issue surprises you, clients and peers may infer that that you did not do a thorough job.
   
2. The root cause may be significant enough to change the focus or direction of your current audit. It may even change the focus of your next engagement. All audits should be risk based. Asking “why” and uncovering root causes exposes risk areas.
   
3. The root cause will often cause other issues in other areas. So, you have fire ants in your kitchen and in your bathroom—and unknown to you—in your attic. If you spray only in the kitchen and the bathroom, the ants will continue showing up in your attic and maybe move into your bedroom. Best to find the mound and wipe it out. In auditing terms, you can either focus on the symptom or concentrate on the root cause.

Roll up the cause

One easy way to uncover the root cause is a little game I call “rolling up the cause”. Simply take the cause of the finding and roll it up higher in the outline to make it the condition. Then ask yourself, “What is the cause of this new condition?” (Do I sound like Edith Bunker?) Perhaps looking at an example will help:

Taking the example we were just working with—our new condition is:

CONDITION:
No one was assigned to the task (this was the old cause—see, we rolled it up!).

Now, act like a two year old and ask, “WHY?”

CAUSE:
There was no job description for the accounting clerk.

RECOMMENDATION:
Assign someone to do cash reconciliations and document the duty in the job description.

OK, that is fine, but until we find true root cause of all audit issues—namely ignorance or stupidity—we aren’t finished. So roll the cause up again. Our new condition is:

CONDITION:
The duty was not detailed in a job description.

Suck your thumb and ask “Why?”

CAUSE:
The whole accounting department does not have job descriptions.

Ew! Might that cause problems in other areas of the accounting department?

What if you ask, “Why don’t you have job descriptions in the accounting department?” and the client says “I didn’t know we needed those.” Congratulations! You have now reached the ultimate root cause—ignorance and stupidity!

Might a lack of job descriptions cause other problems? Yes! This might be the queen fire ant. If you take care of this problem, you might simultaneously take care of problems in other areas.

So, now you have a choice. Either write the issue from the job description slant or the cash reconciliation slant. Or you could even write both. Or you could write that the condition is “lack of job descriptions” and that the effect is “cash is not being monitored and checks are bouncing”. (Do I sound like Edith Bunker again?)

Yes, you can move these elements around ad infinitum

Do you get the sense that you could play with the order and content of these elements until the cows come home? Well, you are right. Add a few people and opinions to the mix and you have no limit on how many versions a team can come up with!

This is why I recommend that you refrain from writing full sentences until everyone has agreed on the structure. But more on that next month! We will talk about tips for making the editing process on your team less painful. No, editing doesn’t always have to leave a psychic bruise.