2012

December 21, 2012

Five Key Headlines From 2012 That Will Shape the Future of Internal Auditing

At about this time each year, I like to look back at the news events and stories that are shaping our profession. Occasionally, we have a year in which few news stories seem to be relevant to internal auditors, but this year — for better or worse — a number of headlines seem destined to affect where internal auditors are headed in the coming year. Each of these stories holds important lessons for internal auditors, so a review of a few of the most important events seems in order.

1. The Presidential Election

At first glance, the U.S. presidential election might not appear to be an internal audit news story.…

December 5, 2012

Good News: More Jobs, Better Budgets, Higher Salaries Ahead for Internal Audit

If you are looking for a job in the internal audit field, I have good news: Despite everything you may have heard about economic uncertainties and a looming “fiscal cliff,” the internal audit job market is heating up. According to our Audit Executive Center’s Pulse of the Profession survey of 545 chief audit executives and internal audit directors, about a fourth of internal audit groups expect staff levels to increase in 2013, and 71 percent expect staffing to remain steady. These are the strongest results we’ve seen in years, and I believe it’s a reflection of the value that audit committees and management are placing in having a strong, well-resourced internal audit function.…

November 26, 2012

It Is Time We Move Out From Under the CFO Shadow

I learned important lessons early in my career about internal audit independence and the impairments that can come from reporting relationships. I began my career as a civilian internal auditor for the U.S. Army. At the time, we had more than 1,900 internal review (audit) auditors in more than 300 Army installations and commands around the world. Virtually every one of them worked directly for the comptroller — essentially the equivalent of a corporate chief financial officer (CFO).

Recognizing the importance of auditor independence throughout government, the U.S. comptroller general soon strengthened the independence standards for government auditors and issued new standards that required internal auditors to report to the “head or deputy head” of government agencies.…

November 6, 2012

A Dead End Job? I Hardly Think So!

Anyone who knows me or follows this blog and my social media presence knows that I am not “thin-skinned” when it comes to constructive criticism of the internal audit profession. I am confident in the remarkable progress that our profession has made and the stature that it now enjoys. I even discuss opportunities for our profession to improve when speaking at internal audit conferences and other events because I believe bringing issues to light can make our profession stronger. But when I read what I believe is misleading research, or when I see inaccurate headlines/articles directed at the profession, I will always make a vigorous effort to set the record straight.…

October 23, 2012

The Biggest Risks in an Internal Audit May Be the Issues You Miss

For many years, I taught accounting courses during the evenings at a local university. I would often tell my students, “The only stupid question is the one that is never asked — unless the question is, ‘Would you postpone the next exam?'”

My years as a college instructor coincided with the early years of my internal audit career (which was essentially my day job at the time). Over time, I came to appreciate that in internal auditing, as elsewhere in life, there really are very few stupid questions.

The most successful internal auditors are not necessarily the smartest or the most experienced auditors; they are often the most inquisitive.…

October 9, 2012

Facilitating Strong Internal Audit Oversight

Ensuring strong and effective oversight of internal audit departments has always been challenging. After all, organizational independence is critical for internal audit functions, so simply reporting to senior management may not support the strongest governance. In fact, the vast majority of internal audit functions achieve a higher degree of organizational independence, at least in part, by reporting functionally to an audit committee. This relationship is usually ideal for enhancing independence, but reporting functionally to an audit committee that meets only a few days each year can create challenges not faced by other departments within the organization.​​

Can audit committees really be expected to maintain effective oversight over internal audit?…

October 2, 2012

It Shouldn’t Surprise Us That “No Surprises” Is Still an Expectation

Back in 2009, I blogged on the fact that many audit committees expected internal audit to help them avoid surprises. I concluded that whether it was fair or not, it was an expectation we needed to recognize. Since then, risks have become more dynamic and unpredictable. Given the environment in which new risks emerge from seemingly nowhere, it shouldn’t surprise us that “no surprises” is still an expectation.

Internal auditors have become increasingly effective in assessing traditional risks; however, the ability to identify and assess emerging risks presents new challenges and requires even greater proficiency. Emerging risks are the newly developing risks that cannot yet be fully assessed but that could, in the near future, affect the viability of our organizations’ strategies and business models.…

September 25, 2012

Sometimes You Can Be Right or You Can Be Liked

I often post my thoughts on Twitter. Most of the time, my Tweets receive few comments, but last week I heard from a surprising number of auditors after simply posting the thought: “Remember internal auditors: Sometimes you can be right or you can be liked — but you can’t be both!”

I immediately received responses from two different groups. Some said they agreed, stating that internal auditors were the traditional bearers of bad news and that this inevitably leads to acrimonious relationships. Others said they disagreed, stating that auditors with good interpersonal skills could find friends in any business environment.

I think both groups may have missed the point.…

September 17, 2012

Assurance on Risk Management Effectiveness: What Are We Waiting For?

For almost four years now, I have been advocating that the internal audit profession embrace the challenge of providing assurance on the effectiveness of risk management. I believe it is the most significant opportunity for our profession in a generation. Yet, recent survey data would indicate that we are reluctant to make such assurance an integral part of our portfolios of internal audit coverage. I have but one question: What are we waiting for?

There is widespread agreement that failures of risk management in the late 2000s (particularly in the financial services sector) were a major contributor to the lingering global economic crisis.…

September 4, 2012

Is Your Risk Assessment Stuck in Time?

There have been plenty of articles and lectures given on continuous auditing in recent years. There is no question that technology is making continuous auditing a powerful tool for both internal auditors and managers, alike. However, despite the growing popularity of continuous auditing, I believe one of the true challenges in the next decade will be to continuously assess risks.

 As I have observed before, management and the audit committee look to internal audit to ensure there are “no surprises.” While it can be argued that this is an unrealistic expectation in a dynamic environment (particularly in companies with vast complex business models), it is nonetheless an expectation that must be addressed.…