Internal Audit Golden Twenties or Latest Tunes

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The internal auditor's conundrum:

Golden oldies or latest tunes?

in May 2017, Deloitte's Global Internal Audit practice hosted its third annual Global Chief Audit Executive (CAE) Forum in Texas. This report extracts exciting insights and themes from the conference: What are the most innovative and progressive internal audit groups doing to raise the stature of their function and the fortunes of their companies?

The lifestyles, fashion styles, and hairstyles of rock stars and internal auditors may differ, but these divergent occupations have more in common than appears at first blush.

Consider the case of a musician with a new album. Out on tour, the performer wants to fill the set list with the latest cuts. The fans, however, turn out for the old hits. How can the artist send the crowd home happy, while simultaneously remaining true to the muse?

Internal auditors face a similar dilemma: their old "hits" - retroperspective and assurance-based audits with a focus on compliance - provide reassuring familiarity to their audience of CFOs and audit committee members. But the siren song of the new "music" - delivering valued advice and predictive, analytical, technology-enabled insights - gets the auditors' blood pumping.

Attaining an equilibrium between tried-and-true and cutting-edge, between a focus on the past and on the future, is critical to keeping both music fans and business executives happy and artists and auditors fulfilled. 

Internal Audit Report: Golden Twenties or Latest Tunes?

The Coasters

Why not just coast along, doing what you've always done, providing a modest but undeniably useful service to the organization?

The answer is simple: the future beckons. Relentless change, competitive disruption, technological advances, morphing threats, and evolving demographics represent a profound break from the past, when a company could dominate its sector simply by playing its safe and conservative. 

The Police

A makeover shouldn't be so extreme that it renders you unrecognizable. As internal audit executives look to remodel their shops, they would be wise to retain some of the familiar trappings that formed their identitiy in the first place. Assurance is, well, reassuring, and the stakeholders that depend on the internal audit for a good night's sleep will not forsake their rest willingly. 

At the same time, many chief audit executives would be happy to expunge some negative perceptions that tarnish their profession. According to several Global CAE Forum attendees, persistent stereotypes linger among some c-suite and audit committee members, who believe that internal audit:

  • adopts a "police" mentality
  • uses a punitive report structure and approach
  • lacks relevant business experience
  • excessively focuses on compliance
  • works reactively
  • offers little appeal to top talent
  • suffers from high turnover

The Mavericks

Seats are not given, they are taken. Make some noise, throw some elbows, raise some eyebrows. Push internal audit in new directions. Deliver unexpected insights. Ask uncomfortable questions. While internal audit shops can't put the past completely in the rearview mirror, the function can turn its gaze toward the future, where the risks and opportunities reside. 

You don't have to change everything at once. A pilot project here, a trial venture there, may be all it takes to chart a new path. 

But where to start?

During the two-day Global CAE Forum, many promising ideas emerged that can push internal audit into a higher plane, most notably in the realm of cutting-edge technology. Here are a few tools that progressive internal audit groups are adopting:

  • Data visualization tools
  • Robotic Process Automation
  • Blockchain
  • Agile Internal Audit

Nirvana

What other developmental areas hold promise for internal audit? Participants at the Global CAE Forum describe a variety of strategies that have yielded success:

  • In order to broaden the internal audit's mandate, it must also broaden the talent mix
  • Internal audit can help defend the organization's brand and reputation
  • CAEs frequently state they'd like to transition internal audit into more advisory activities
  • Jazzing up your reports
  • Increased attention to cybersecurity
  • Becoming more flexible

U2

The notion that rock stars and internal auditors share commonalities may not be so far-fetched after all. Consider: until relatively recently, no one envisioned that a staid, behind-the-scenes profession could spawn a true celebrity. Yet veteran auditors will remember early in the 21st century when an internal auditor was named a "Person of the Year" by Time Magazine, raising the profile and stature of the profession to unimagined heights.

The world of business is undergoing a dramatic shift. Internal audit can help lead the way or can be dragged along. Embrace the new role and it will embrace you too.

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