Are you ready for the changing role of internal audit?

by Terry Owen

The pandemic and the changing role of internal audit have likely prompted you to make quick and sweeping decisions in order to continue to deliver for your stakeholders. I imagine that you have made an untold number of adjustments to the way you lead your audit team on-the-fly in 2020. Congratulations on a job well done!

As we are still in a state of flux, this could be the perfect time make a few more tweaks and to set your team up for future success. Things are moving faster and faster for our profession and it could be an opportune time to prepare your team for the changing role of internal audit.

In other words, before the vaccine comes out and we all get back to our new normal, it is a great time to ask yourself, “If my team returns to ‘business as normal’ will I be pleased?”

What is the changing role of internal audit?

Organizations with limited resources (and that pretty well covers all of us!) expect more value from their investment in internal audit. Because everyone in the organization is expected to do more with less, a once common approach to auditing – that I dubbed “the whack-a-mole approach to auditing” – may no longer be tolerated. Whack-a-mole auditors audit the same areas repeatedly and if they stumble on some minor control weakness, the whack-a-mole auditor performs an all-out assault on that area!

As more and more organizations are embracing change and learning how to be more agile and risk-based, internal auditors are expected to follow suit. And as scary as the changing role of internal audit is, any change is more appealing if you view it as a chance for growth and adventure.

From submarines to nuclear laboratories

Take my career for an example. I enlisted in the U.S. Navy right out of high school. As a young man, I was ready for an adventure and spent twenty years on submarines and surface ships. I went from scrubbing bilges and being covered in hydraulic oil to becoming a commissioned officer and leading a ships’ repair facility with talented and dedicated sailors and civilians. Along the way, I learned a lot about leading people, managing complex projects and dealing with circumstances beyond my control.

Thanks to the G.I. Bill, I completed a bachelors and masters of accountancy and went to work as an auditor for a large Department of Energy laboratory. I started my new adventure in auditing at the bottom as a staff auditor but, with the help of some excellent mentors, I eventually worked my way into management. I found that the leadership lessons that I’d learned in the military directly translated to my success and the success of those I led in a 15-person audit shop.

Now I have embarked on a new adventure conducting maturity assessments of internal audit shops.

What I learned about preparing for change

Here are nine key actions that I learned in the Navy which will help you and your organization meet the changing role of internal audit:

1. Know where you are: For a ship to navigate from point A to point B, the captain must first know which port they’re in. Likewise, your audit shop must understand its starting point. For that you need to perform an honest appraisal of your strengths and opportunities. Brainstorming and benchmarking are two great methods for doing this.
2. Know your risks: A ship’s crew must understand the ship’s capabilities and limitations. As part of your brainstorming, you need to understand what your risks and threats are. Leave nothing off the table. Some of it may be hard to hear but if you don’t know about it you won’t be able to fix it.
3. Know your objective: The objective of a submarine is to remain undetected, underwater for long periods of time and surveil an enemy. What’s the objective of your audit shop? Hopefully, it’s not to seek and destroy! Instead, perhaps it’s to provide value-adding services through risk-based auditing, or some similar objective? Never lose sight of your objective and remind your team what the objective is on a regular basis.
4. Develop consistent processes: Before a submarine sets out to sea, the crew completes a multi-page checklist. 120 lives are dependent upon the quality and consistency of those checks. That process was efficient and ensured that nothing was overlooked. Does your audit shop have consistent audit processes and templates? Do you have policies and procedures manuals that are useful? Consistent processes will help you ensure that you remain in compliance with standards and provide a quality output to your customers and stakeholders.
5. Provide the right tools: At a Navy shipyard, I led a team comprised of electricians, mechanics, welders and divers. I always ensured that they had the tools that they needed to do their work. Having been a mechanic when I was a young sailor, I knew that there was nothing more discouraging than not having the right tools. Does your organization have computers that are less than three years old? Do your team members have up-to-date software and access to the data they need? Are your policies and procedures manuals a useful tool?
6. Nurture your people: Navy leaders know that if you take care of your crew, your crew will take care of you. As an audit manager, I knew that the time and money that I spent on each of my staff was a worthwhile investment and not a cost. Your training program, mentoring program, performance evaluation and compensation policies should bring the best out in your staff and help them reach their professional goals.
7. Always have a Plan B: The adversary may not always take the action that you thought they would in the middle of the battle. A pandemic causes you and your entire staff to work from home for an unknown number of months. The top auditor that you thought would be your right-hand person for at least two more years got a better job offer. Managers usually have a Plan A. Leaders always have a Plan A and a Plan B.

   

8. Know when to course correct: Ocean currents cause a ship to constantly stray off course. The navigator must provide constant feedback so that the ship’s speed and course can be incrementally adjusted to get back on course. As an audit manager, I found that making incremental improvements were much easier and less stressful on my team and required less disruption to our work.
9. Ask for help: SOS is the international sign for obtaining assistance. Internal audit organizations are being challenged like never before. Because of the changing role of internal audit, it may be time to ask for assistance from outside professionals.

We can help

Our team believes that new challenges lead to new opportunities and we can assist you with each of these nine key actions. Now is a great time to step back, assess the entirety of your organization, and retool your operations to meet the changing role of internal audit.

We’ve developed an innovative new assessment tool named DART that will assess your internal audit organization on 13 different dimensions and assist you in finding new opportunities for improvement. Those dimensions include: compliance with standards, organizational maturity and risk management.

DART will aid you and your organization to zero-in on new ways to meet the changing role of internal audit. Also, you’ll be receiving the benefit of a team of experienced internal auditors, trainers and leaders who have faced the same challenges that you’re facing.

For more information contact Leita Hart-Fanta at leita@yellowbook-cpe.com or call 979-4YELLOW (979-493-5569). We look forward to working with you.