In this solo episode of the No Days Off Podcast, host Brian Gubernick draws on his 23‑year background as an auditor at Deloitte to walk listeners through the seven‑step financial audit process—engagement, planning, risk assessment, fieldwork, testing, evaluation, and reporting. He illustrates each step with real‑world audit experiences (Arizona Cardinals salary‑cap audit, Discount Tire inventory counts, cross‑border nuts‑and‑bolts inventory). After establishing the standard audit framework, Brian argues that the same disciplined methodology can be applied to audit one’s own business, health, wealth, and personal relationships. He outlines how to adapt each audit phase—understanding the “business,” identifying risks, conducting fieldwork (e.g., data analysis, interviews), testing assumptions, evaluating evidence, and reporting findings—to uncover deficiencies and drive improvement. The episode concludes with a motivational call to regularly “audit” all aspects of life to ensure reality matches perception and to take corrective action.
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Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off Podcast, where we believe that every single day brings a new opportunity to get better. Let's get into today's topic. Today I want to talk about the auditing process, and I'm going to do so first by taking a trip down memory lane. Some of you may know though I'm going to guess most do not, that 23 years ago when I started my business career coming out of college, I actually came out of college as an accountant. I worked for a firm called Deloitte Touche, now just goes by Deloitte, and it was a big accounting firm. And I was an auditor. When you're coming out of school, and I think it's still the same way today, and you want to get your CPA, when you want to become a CPA, you've got to get a couple years of big accounting firm experience. And my intention was to put 2 years into audit and therefore earn the experience requirement before I went and sat for the CPA exam. Well, that never happened. Again, story for another day. But I spent my first 2 years of my business career running financial audits. I worked on a variety of clients here in Metro Phoenix. And outside Phoenix, as a matter of fact. Some of them were public companies. Some of them were actually private companies, but they had debt obligations or some other things that required their financial statements to be audited. Some just wanted it, wanted audited financial statement just for their own wellbeing. I took on all different sorts of jobs from the Arizona Cardinals and their salary cap to Discount Tire to a handful of other companies. Anyhow, Why am I talking about all this? Well, I was thinking through, you know, back when I was doing this, and again, I was a staff accountant, I was a low man on the totem pole, but I did play a role in all aspects of the audit. And I thought it'd be worthwhile to talk through how a financial audit actually works, the steps required, and then ask you how might you use this same process in auditing your business, your health. Your relationships, your wealth, all of the things that we talk about here at No Days Off. First, in a financial audit, how's this work? Well, you've got the engagement process. So the client would engage our firm to conduct this audit. And we would formalize this through an engagement letter. And it says, here's the scope of the audit. Here's, here's our responsibility as the auditing firm. Here's your responsibility as the client. And then any other relevant terms. For sake of today's conversation, the engagement step number 1 isn't really all that important, but what's important is now step number 2 in the audit process, planning. The auditor plans the audit by gaining an understanding of the client's business. So we would, you know, if we didn't already know, we would go study that client's business. We'd read their financial reports. We'd go, you know, go online and see what they had there. We'd read any sort of publication or, or news article about the client. We need to understand their industry. We especially wanted to understand their internal controls, and most importantly, for sake of the audit, we wanted to know the risk factors. We would then assess the risk of material misstatement in their financial statements, and we'd come up with an audit plan that was tailored to the specific circumstances of that client. So step number 2 in the audit process was planning. And we spent a good amount of time planning because then we got to step 3, which was risk assessment. We would identify significant accounts of the client and transactions that could actually have a material impact on the financial statements if they were misstated. We'd assess the risk of the errors and, and potentially even potential fraud in these areas, and then we would determine the extent of testing that we would do in order to obtain this sufficient audit evidence that we needed. So like I said, we would engage, we would go through a planning process, then we'd run risk assessment. We'd say, where's the greatest risk here for error or fraud? Step 4, which was really the lengthiest part of everything, was the actual field work. Now we'd go out to the client's offices, or wherever we were supposed to go, you know, where the financials were located, as well as the financial team and those that played a role. If they had inventory somewhere, we may go there, but we would go out to the client and we perform all sorts of procedures to test the accuracy and the completeness of their financial information. Maybe we were examining documents. Maybe we were interviewing staff and management. We were doing analytical procedures. I was the low-level ranking guy there, so I got the best jobs. I got to go count, you know, their inventory. Discount Tire, I counted tires at different locations. I once, I once worked on a company that was literally nuts and bolts, and I had to go across the border from Arizona into Mexico and count, spot-check quantities of nuts and bolts. That's the stuff we would do to check the accuracy of the data that we were being given. The field work, like I said, was like this. Then we'd run testing. Step 5 in the process was testing. We would select samples of transactions, samples of balances, and we would test on the risk assessment. We different— we do different reconciliations. We'd check in, we'd mail letters to third parties confirming balances. We'd inspect all documents. I would read a lot of contracts and just highlight things and ask questions around it. Step 6 was evaluation. We had everything compiled now, so we would evaluate the evidence, and then we would kind of ish start to begin to issue our opinion on things. It's accurate, it's inaccurate, we see challenges here, or this looks good. The job was to pretty much determine that the financial statements were free from a material misstatement. And then lastly was the reporting. We would communicate our findings and our opinions in some sort of audit report. And then depending on the need for the audit would dictate the type of audit report that was, that was issued. Why am I sharing all this with you today? Because I think that every single one of us can take this exact process and apply it to the analysis we do on our own business today. We also can do this with our relationships. We can do this with our health and wealth, as I stated at the very beginning of this episode. For example, let's take a look at our business. If we took a look at your business right now, let's say you're a real estate team owner and I want to plan the audit for your team. I need to gain an understanding of your business, right? You need to gain an understanding if you're looking at your own business. What's my industry? What's my business look like? What are my internal controls, right? Like, how do I know things are getting done in the manner they're supposed to get done? Lastly, where are the risks? But not just the risk like in a financial audit, you know, we look for risk of misstatement in financial statements, but I'm talking about just risk overall. Where's our exposure as a business? Now the next step, let's assess those risks. Where could these risks be showing up? What accounts or processes do we have right now that can materially, that could be materially impacted? Assess the, the, the risk of, of, of errors and of fraud. Meaning that again, financial statements might have errors and fraud, but where are the risks with respect to your systems breaking down? What kind of testing do you need in order to determine this? Right? Are you just going purely off a gut feeling? Well, sure. That's a great start, but prove to me that your systems are going to actually work in an up market or a down market. Now the fieldwork. I want to perform different procedures to test the accuracy and completeness of what you're sharing with me. Maybe I need to, you know, examine your database. Maybe I need to examine your economics. Maybe I need to better understand your hiring process. How do I do that? Maybe I interview the people on your team. Maybe I interview the people that have left your team. Maybe I just sit and observe what transpires throughout the morning to see if it ties out to what you told me transpires. Maybe I could do some analytical analysis where you tell me this lead source or that lead source is performing well, but maybe I go and independently analyze to see if I see that ROI that you're describing. Now I could do further testing. I'm going to take specific transactions and audit them in terms of customer experience, audit them in terms of the financial flow, audit them in terms of, you you telling me how the deal was done versus what truly transpired. Next, I'm going to evaluate. I'm going to take all of this information and I'm going to evaluate the evidence to determine whether, you know, your business is operating as you think it should. I want to identify deficiencies in all things that you do. The purpose being that if I identify the deficiencies, you can now turn around and fix them. I know this might sound over the top, but I think so many of us go out and we run and run and run, and we don't reflect or analyze to the level that we should. In other words, we're always forward-looking, which is great, but I think in order to continue making progress going forward, it's, it's smart to turn around and audit everything that's transpired. Is what you're thinking happening really happening? That's the question. Now, I talk business. You can do this, of course, in your health. Here's what I'm saying I'm doing. Am I really doing it? What tweaks can I make? Where are the risks? Where's my exposure? In my relationships, if I were to audit your relationship and you told me all about your relationship, but then I was able to observe and, and, and analyze and even do tests and question Ask other people about their perspective or perception on your relationship. Would it all tie out? The idea here isn't to expose anybody. The idea here is to reflect, assess, and then take action around the key findings. So for some of you, uh, maybe this doesn't make a heck of a lot of sense today, but for many of you, I think we all, you know, I think, I think we should all consider auditing all that we're doing. Again, is what we think is happening truly happening? The only way to know that is if you turn around, roll up the sleeves, and dig in. That's all I have for you today, the No Days Off podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it. [MUSIC] [MUSIC]
