Characteristics of a World-Class Internal Audit Department, Part II

Last week, we introduced five attributes of a World Class Audit Shop (WCAS). This week, we introduced five more attributes for WCAS. They are:

  • Constantly Striving for Improvement – WCAS not only focus their efforts on operational auditing but they constantly perform an internal operational audit – continuously looking to improve audit efficiency and effectiveness through reassessing currently techniques and utilizing technology as much as possible. Embrace change and become a poster child for change inside the organization.
  • Strong Succession Planning through Recruiting and Training – Turnover in internal audit departments can become overwhelming and is constant, especially with the demand for internal auditors currently. WCAS are constantly looking at advancing current team members and replacing others. WCAS invest in training and development, not just for the department but for the long-term development of each employee.
  • Rapport Building – In last week’s blog, we discussed the importance of communication. I believe that communication is key but building strong relationships and trust is as important. WCAS build friendships and mutual respect so that when difficult conversation are necessary, there is enough invested in the relationship to understand that both parties are acting in the best interests of the company.
  • Market the Benefits of Internal Audit – WCAS view all members of the department as sales people. WCAS are constantly marketing the benefits of internal audit and what we can do to help the organization achieve its objectives.
  • Visionary Leadership – Internal audit is an independent function but is it really? We are all paid by the Company so real independence is through the leadership team and CAE. WCAS know when to battle and know when to let it go. There are many jobs in the world and regardless of how great of a position it is, there are always others. On the other hand, WCAS do not circumvent their ethical being for the organization. If it is worth fighting for, they will fight and they know their leadership team will be supportive.

I have no doubt there are more and I could continue on…..What are your thoughts? What is missing from this list?

Characteristics of a World-Class Internal Audit Department, Part I

A few weeks back, I was asked by one of my Audit Senior School attendees what are the key attributes of a world-class internal audit department. I have honestly not ever thought about this since, in my opinion, there are so many and they could be very different based on size, industry and geographic location. After some research and deep thought, here are the ten that I believe permeate through all of the differences previously outlined and are necessary for all world-class audit shops (WCAS):

  • Forward Thinkers – Many auditors only focus on compliance-related risks or only on the past. As Richard Chambers likes to say, auditors must be able to “audit at the speed of risk”. WCAS need to be able to audit strategy and assist the company in assessing future risks.
  • Communication – Auditors must be able to communicate at a high level and communicate transparently and continuously. This builds trust and creates more opportunities where we can assist the business in meeting its objectives.
  • Diverse staff skills/background – A few years back, I spoke at the GAM conference and had an in-session disagreement with an attendee that stated the best auditors are usually CPA’s. I might have agreed with this in my 20’s but as I have gotten more experience, I realize the need for as much diversity as possible in an internal audit shop. WCAS need CPA’s, industry personnel, people from the business, anything and everything that helps gives diverse perspectives to any audit.
  • Add “Value” to the Organization – I have always disliked the term “Value” because that term is subjective and beauty is in the eye of the beholder. WCAS define value through that view and understand what the clients and organization views as value. With that defined term, WCAS constantly strive to deliver this to their clients through their audits.
  • Understand the Objective of Internal Audit – Having a mission/vision statement is key; however WCAS always keep in mind the red book definition of internal audit:

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

It is imperative that WCAS remember we are assisting the organization in meeting its objectives. I ask my classes what the definition of internal auditing is routinely and I would estimate 90% do not remember this key phrase in the definition. If auditors do not remember this, trust me the business easily forgets this key point. This is something WCAS constantly stress through the audit process and this should help connect the audit client with a message they can buy into.

Those are five of our ten; next week we will introduce our next five attributes of a WCAS.

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