We are a rather vocal proponent of auditor qualifications and set a high bar for ourselves and others who call themselves auditors. Non-CPA auditors are “regulated” differently than CPAs and in some cases, less stringently. Auditor certifications are available for non-CPAs specific to areas of practice. These certifications vary greatly in terms of validity, rigor and length of time they have been established. In our case health, safety and environmental (HSE) auditor certification is applicable.
In the US, the Board of Environmental Auditor Certification (BEAC) was established in 1997 as a joint venture between the Institue of Internal Auditors (IIA) and The Auditing Roundtable. Earlier this year, BEAC and The Auditing Roundtable were wholly merged into IIA. Elm Principals obtained BEAC certification the year it was established and have maintained the annual continuing educational requirements to hold the certification continuously since then. Three of our Principals have for the past 10 years held – or currently hold – leadership positions on the Boards of The Auditing Roundtable and BEAC. In the UK, the Institute of Environmental Management & Assessment (IEMA) offers auditor and practitioner certifications. One Elm Principal holds an IEMA certification as well.
The Independent Private Sector Audit (IPSA) requirements finalized under Dodd Frank Section 1502 for conflict minerals reports added more professional qualifications for IPSA practitioners. Elm responded by adding a stand alone page on our website describing our audit quality practices. We haven’t seen other firms provide the same level of clarity, specificity and visibility on this matter. From our beginning, we sought to ensure our qualifications, expertise and professionalism were unparalleled.
During the past 10 years, a new type of audit emerged – the social or corporate responsibility audit. Most of these audits are commissioned by large companies to be conducted of their suppliers to ensure that they are conforming to social responsibility standards. We have found over the years, the perceived value of these audits has reduced dramatically and price is far and away the primary auditor selection criteria. Of course, with reduced pricing comes reduced scoping and level of effort.
And here is the mic drop.
It isn’t unusual to see social auditor qualifications indicating something like 2,000 audits conducted over 10 years. At first, that sounds very impressive. But do some math – on average, that is 200 audits/year or 16.7/month. Assuming a full time US standard work year (2,080 hours) and 75% utilization, that comes to a little over 7.5 hours/audit average.
In comparison, Elm Principals average close to 30 years of experience each, and have conducted between 500 – 600 audits each. In comparison to the 2,000 social audits, we seem to be slackers. But again, doing math on conservative numbers (25 years and 500 audits), we average of 20 audits/year or 1.7/month. Again, assuming a full time US standard work year and 75% utilization, that comes to 78 hours/audit average.
These are just averages and different matters factor into real numbers for both social audits as well as ours (our average is more like 55 – 60 hours/audit). But clearly there is an order of magnitude difference between our HSE audits and social audits.
Are we inefficient or milking billable hours? We hardly think so. First off, our business model is different – we don’t run on billable hours, which relieves the pressure most firms have for project volume. Our audits are far deeper and more complex than a typical supplier social audit – almost always requiring two to five auditors and a week on-site. We spend significant time delving into documentation, spreadsheets, permits and regulations at the federal, state/provincial and local levels. Our data sampling rate is generally far higher than the minimum statistically meaningful level. We carefully evaluate and confirm operating and production levels, including technical operating parameters for pollution control equipment. Most of our audits also include assessing performance of on-site contractors. We even show up on site at 3 a.m. to observe third shift operations. And we cover the full breadth of environmental, health, safety and – when the client requests – sustainability indicators.
This is not to say that all social auditors are poor auditors or unqualified. We have observed some in the field and have been impressed. There are also instances where limited audits/site visits are reasonable in the social auditing context. But with social auditors expanding into other areas of supply chain and operations, the social audit approach and qualifications are not universally appropriate even though the price they offer may be attractive. You may want to think carefully about your needs and expectations, as well as the numbers on CVs and ask yourself if the auditor is actually impressive or overworked and under-scoped.