Our Tricky Little Minds

January 2007

[I know. I know. I am supposed to be writing about the new risk assessment SAS’s. And I do have plenty to say about that (I am writing a self-study book on that right now—ugh!) BUT, I ran across something in my files the other day that I want to share with you. It is a list of distorted thought patterns. It is still too early in the year to get serious, so let’s do something that has NOTHING to do with the AICPA.]

We have all seen and been privy to audit reports that somehow miss the mark. Audit reports that make the audit client scream, “I have been wronged! You are exaggerating and making a mountain out of a molehill.” They argue that we are misconstruing the facts and making things look worse than they really are.

I have this tendency—personally—when I am under a lot of stress. I make little things a big deal, and oftentimes miss the big important stuff because I am imagining all sorts of crazy scenarios that have no basis in reality. (My Granny used to call it “worry”. Professionals call it “neurosis”!)

You may be saying to yourself, “That woman needs a therapist.” And taking your advice, I have spent many hours talking things out with a very talented therapist named Marilyn.

Several years ago, Marilyn shared the following list with me, entitled “Cognitive Distortions”. I think they apply to the audit world and to audit reports in particular, so I am moved to share them with you. Marilyn’s list is in italics. My cheeky comments are not italicized.

1. ALL OR NOTHING THINKING – You see things in black and white categories. If your performance falls short of perfect, you see yourself as a total failure.
   
   If the client doesn’t get petty cash controls right, they obviously have a problem with their control environment and need to be reprimanded and audited to death, right?
   
   
2. OVERGENERALIZATION – You see a single, negative event as a never ending pattern of defeat.
   
   Let’s take that one error and conclude that controls are weak and management is incompetent. Yes, that sounds reasonable. (NOT!)
   
   
3. MENTAL FILTER – You pick out a single negative detail and dwell on it exclusively so that your vision of all reality becomes darkened; like the drop of ink that discolors the beaker of water.
   
   If they can’t get that one little detail right, they can’t be trusted to get anything right.
   
   
4. DISQUALIFYING THE POSITIVE – You reject experiences by insisting they “don’t count” for some reason or other. In this way you can maintain a negative self-image.
   
   Yes, I know that you won the Malcolm Baldrige Quality Award, but you missed putting form X17 in the file on October 17, 2002. You are obviously incompetent.
   
   
5. JUMPING TO CONCLUSIONS – You make a negative interpretation even though there are not definite facts that convincingly support your conclusion.
   
   

   • MIND READING – You arbitrarily conclude that someone is reacting negatively to you and don’t bother to check this out.

   • FORTUNE TELLER ERROR – You anticipate that things will turn out badly, and you feel convinced that your prediction is an already-established fact.
   
   1 out of 10 files sampled were in error. That means 10% of the population is in error. That means that 10% of the $1M grant is a questioned cost and that the grantee must write a check to the federal government for $100K.

6. MAGNIFICATION (CATASTROPHISM) OR MINIMIZATION – You exaggerate the importance of things (such as a goof-up or someone else’s achievement), or you inappropriately shrink things until they appear tiny (your own desirable qualities or the other fellow’s imperfection). This is also called the “binocular trick”.
   
   This error creates a questioned cost of $725. You are in danger of losing your federal grant.

7. EMOTIONAL REASONING – You assume that your negative emotions necessarily reflect the way things really are: “I feel it, therefore it must be true.”
   
   Stephen Colbert, the comedian, invented the word “truthiness.” It is the Merriam-Webster's Word of the Year for 2006:
   
   1. truthiness (noun) 1: "truth that comes from the gut, not books" (Stephen Colbert, Comedy Central's "The Colbert Report," October 2005) 2: "the quality of preferring concepts or facts one wishes to be true, rather than concepts or facts known to be true" (American Dialect Society, January 2006).
   
   Be careful that you can tie every single statement in the audit report to a working paper and that every working paper is backed up by strong evidence.
   
   
8. SHOULD STATEMENTS – You try to motivate yourself with shoulds and shouldn’ts, as if you had to be whipped and punished before you could be expected to do anything. “Musts” and “oughts” are also offenders. The emotional consequence is guilt. When you direct should statements toward others, you feel anger, frustration, and resentment.
   
   One of my dear friends, Tom, who is also a therapist… hmmm, I am seeing a pattern… is always reminding folks not to “should all over themselves”. Holy mackerel, There go our audit recommendations! We are masters at should-ing all over folks.
   
   
9. LABELING AND MISLABELING – This is an extreme form of overgeneralization. Instead of describing our error, you attach a negative label to yourself: “I’m a loser.” When someone else’s behavior rubs you the wrong way, you attach a negative label to him: “He’s a louse.” Mislabeling involves describing an event with language that is highly colored and emotionally loaded.
   
   Ever heard one of these labels?
   
   - Lack of supervision
   - Lack of management oversight
   - Incompetent
   - Ineffective
   - Weak
   - Poor
   - Inadequate
   - Failed
   - Insufficient
   
   Those labels will cost someone many dollars and hours in a therapist’s chair! And they will cost you many hours of wrangling and arguing with the client about the audit report. Why be insulting? There is no need to be insulting, when the facts will often do enough damage without putting a label on the client or the client’s work.
   
   
10. PERSONALIZATION – You see yourself as the cause of some negative, external event, which in fact you were not primarily responsible for.
    
    Ever felt the need to label a scapegoat for a particular problem, when in fact it was not in anyone’s control?

Isn’t that a hoot? We are doing this stuff to auditees and ourselves all the time.

How do you prevent this? Well, you can do as Joe Friday requested in Dragnet and “Just stick with the facts, ma’am.”

Here is a very common audit report paragraph:

Internal controls over cash are weak. The accounting clerk does not reconcile cash collections to deposits each day.

That first sentence is using distortion number 2: Overgeneralization (is it ALL controls or just this one?) and distortion number 9: Mislabeling (weak). We don’t have to label or over generalize if we just stick with the facts. Change the paragraph to read:

The accounting clerk does not reconcile cash collections to deposits each day.

Try looking at your most recent audit report and compare it to this list of distortions. I think you will find it amusing. If not, I can give you Marilyn or Tom’s number.

Happy New Year, you clear thinker, you!