2014

As 2014 draws to a close, I am reflecting on the events that will have a lasting effect on our profession. Each year, various news reports hold clues about emerging risks and future trends in internal auditing. This year, five headlines in particular stand out because they mark events that could change our path forward for the foreseeable future.

So, here is my list of the five headlines from 2014 that are most likely to shape the future of internal auditing. Each of these stories holds important lessons for us all.

1. Revenue Recognition Poised to be the “Next Big Thing” for Internal Auditors

As I pointed out in a recent blog post, changes to rules regarding revenue recognition — “Revenue from Contracts with Customers” — will soon replace more than 200 pronouncements from both the U.S.…

A​s internal auditors, we know it’s essential to win consensus. We work hard to create a shared understanding of risks, and to gain buy-in for our recommendations. But blindly striving for consensus is not always healthy for our organizations. When important business decisions need to be made, it is important to express our opinions, and to encourage and listen to contrarian voices, rather than to risk the impact of “groupthink.”

Groupthink often results from an uncompromising desire for harmony or conformity. It’s more common than you may realize, and it’s especially prevalent in groups with dynamic leadership. The energy and passion that drive an organization to success can subtly shift conversations.…

Many new internal auditors believe that, when a report is issued, their job is done. In reality, being an effective internal auditor ultimately hinges on one’s ability to be an agent of change. Intern​al audit effectiveness depends not only on having the right advice, it also depends on whether management takes actions on issues that we identify. It’s true that implementing internal audit recommendations is management’s responsibility, not ours. But, unless we convey a compelling case and help to create a sense of urgency about making needed changes, our work often will be in vain.

Creating a sense of urgency to implement change can be surprisingly difficult.…

The saying that “perfect is the enemy of the good” seems to apply especially to internal auditing. Some of the most common mistakes by new internal auditors are made simply because we want our work to be, well, perfect. That’s an admirable goal, but perfection can take time — and time is the enemy of audit efficiency.

One of the hardest lessons I learned as a young auditor was to resist the temptation to over-audit. We all want to produce the best, so when we develop an audit program, it’s only natural to try squeezing just one more thing into the schedule.…

This edition of my blog is being written as I visit Tokyo, where I will be addressing more than 100 internal audit professionals as part of a series of IIA events throughout Asia. Wha​t I am witnessing at each stop in my journey is true enthusiasm for our profession throughout Asia, with lively debate and sharing of ideas that are crucial to the advancement of internal audit knowledge. But there also is new excitement about our profession here that is evident not just in the number of people attending seminars and conferences, but also in the faces and attitudes of the internal auditors I meet.…

There are times when internal audit clients and others have unrealistic expectations about our profession. It’s not surprising then that there may be confusion about our role — after all, internal auditors wear many hats. We are analysts, controls experts, consultants, teachers, business partners, watchdogs, financial advisers, compliance experts, and more. We truly can audit almost anything. While some risks clearly require additional expertise to audit, as I said in an earlier blog “you don’t have to be a clown to audit the circus.” However, it’s important to remember that, while we might be able to audit anything, we can’t audit everything.…

As internal auditors, we all face adversity over the course of our professional journey. At times, the challenges can be as simple as the frustration of dealing with a client who doesn’t see things the way we do. At other times, our careers and lives may be radically altered by uncontrollable events, such as a layoff, recession, serious health issue, or family crisis.

I will be the first to admit that I have been very fortunate to not have faced many instances of profound adversity. Like almost everyone, I have had moments of professional and personal disappointment, but nothing compared with what some of my colleagues have endured.…

I met a behavioral psychologist at a recent conference who told me he thinks internal auditors “get it all wrong” when it comes to changing our clients’ behavior. He said internal auditors, especially in their reports, concentrate on what went wrong in the past, and often fail to mention anything that went well or is operating efficiently in the present. The psychologist was adamant that positive reinforcement works best when you want to change behavior, and that this “rule” is especially important in a profession such as internal auditing because, as auditors, we have a reputation (whether deserved or not) for finding fault more often than we find reasons for praise.…

Over the years, I have addressed many internal audit audiences around the world on the importance of aligning with stakeholder expectations. I often close my message by encouraging chief audit executives (CAEs) and internal auditors to shed the image of fault-finder and traffic cop (images for which too many suffer), and become trusted advisors who provide insight and foresight – not just hindsight. When I finish delivering my message, the question is invariably asked: “How do I start?”

The first steps in transforming an internal audit department’s image can be crucial. A false start, or one that is perceived as insincere, can render any efforts that come afterward as downright fruitless.…