2015

It has become my habit to make the final blog of the year a look back at the top five stories that will likely have a lasting effect on the profession. In my mind, 2015 will be remembered primarily as the year of the corporate culture-induced scandals. Unlike prior years, the corporate scandals this year had a truly global feel. There was the Hertz scandal in North America, Toshiba in Asia, and Volkswagen in Europe. Then to drive home the point, there was the FIFA scandal that was truly global.

These and other headline-grabbing events will have a long-term effect on internal auditing, either directly or indirectly.…

The saga of Volkswagen’s auto emissions scandal has been well-chronicled in recent months. Company engineers installed software in the engines of 500,000 U.S. vehicles and 11 million vehicles worldwide designed to illegally circumvent strict emissions rules. The allegations and subsequent confirmation by company executives have severely damaged public confidence in the iconic company.

However, as despicable as the actions at VW were, company executives have made a number of notable efforts to acknowledge what happened in an effort to restore public confidence. The most recent effort was a December 10^th press conference where senior VW executives, including Chairman Hans-Dieter Pötsch and CEO Matthias Müller, made public the results of a recent internal audit report on the scandal.…

As I have often commented, the internal audit profession in its early years was focused extensively on the past. Strong internal auditors were the ones with 20/20 hindsight — they could go back in time through skillful use of records and interviews to uncover every mistake, then report each misstep in exacting detail. Back then, we thought we best added value when we helped our organizations recognize mistakes and avoid making them in the future. At most companies, our primary role was to be the hindsight experts.

Hindsight will always be important for internal auditors. Even in the 21^st century, we are brought in to assess what happened.…

As internal auditors, it’s quite natural to assess and advise our organizations on effective risk management. With greater frequency, we provide assurance to management and the board that the enterprise is adequately assessing risks, and that risk mitigation strategies are being developed and implemented.

But what about our own risks? Can we say with any degree of certainty that we are identifying risks to our internal audit departments? And are we taking adequate measures to mitigate those risks?

All too often, the answer is “no.” We are frequently missing important topics when crafting our annual plans and we don’t always address inadequate resources or expertise on our staff.…

In a recent conversation, a seasoned CAE recruiter shared his frustration that a number of high-profile companies are offering below-market salaries for their CAE positions. I responded to him that I wasn’t surprised. In fact, I shared my long-held view that some companies don’t want a strong CAE, so they price the role accordingly. After all, “You get what you pay for.”

On the surface these look like companies simply being shortsighted in trying to save money at the price of maintaining a well-run internal audit function. At worse, we’re talking about benign neglect, right? Wrong. The truth is there is a much more treacherous side to this equation.…

Are you one of the best and brightest internal auditors in the profession? Are you dedicated, determined, and detail-oriented? Are you knowledgeable and self-reliant, and so you almost always have the correct recommendations for complex internal audit findings? Great! But be warned: Your professional assets can become liabilities.

These leading qualities would normally serve you well in the internal audit profession. But all of us are fallible, and far too often our “blind spots” are closely linked to our strengths. I have identified several characteristics that successful internal auditors normally possess. However, I also have noted circumstances I have observed in professionals when these attributes became albatrosses:

Are you the most dedicated auditor in your department?…

I am often asked by those within the internal audit profession, “What keeps you up at night?” My answer often surprises. One of the things I worry most about is a high-profile ethical lapse by a member of our profession that tarnishes us all.

We have been fortunate for the most part, but occasional lapses by wayward internal auditors do sometimes make the press. On those rare occasions, someone in the media may wonder aloud, “Who is watching the internal auditors?” None of the cases in recent years has been devastating to our reputation. However, a recent example of a wayward internal auditor illustrates just how easy it is for a bad apple to tarnish the whole profession.…

Great internal auditors understand the value of perspective. When grown and nurtured through exposure to all areas of the organization, it is the driver of insight. This definition sums up exactly how perspective works for internal audit:

The faculty of seeing all the relevant data in a meaningful relationship.

Indeed, developing an informed perspective of the organizations we serve is at the heart of establishing, demonstrating, and maintaining internal audit’s value. It is this holistic knowledge that helps internal audit steer the organization clear of the problems that keep the C-suite and board up at night.

My thoughts turned to the value of perspective during The IIA’s recent All Star Conference. As many of you know, the annual conference brings together the best of the best – those speakers from the past year’s IIA conferences who received the highest rating from attendees.…

Last week, the world celebrated “Back to the Future Day,” an event inspired by the 1989 movie Back to the Future Part II, which envisioned what life might be like in 2015. Like many, I was captivated when I first saw this box-office hit, starring Michael J. Fox and Christopher Lloyd. Its quirky vision of a flying hover board and a flying DeLorean turned out to be a mixed bag in terms of accurately predicting life in 2015, but all of the attention to the movie’s predictions over the past week inspired me to ponder how much internal audit has changed since the 1980s.…

Each of us have likely encountered individuals from whom we have learned much about the art of leadership. If we are fortunate, we are able to look back and identify a handful of inspiring and​remarkable individuals who were particularly important influences. In the course of my career, one such leader was Ernie Gregory, an iconic former U.S. Army civilian executive whom I wrote about in my book Lessons Learned on the Audit Trail. Ernie recently passed away, and I have been reflecting on the important lessons in leadership that I learned from him.

I first met Ernie in 1982, when I was a junior level internal auditor in one of the Army’s major command internal review (internal audit) offices.…