March 7, 2016

Too Many Boards Sit on Their Hands as CAEs Are Hired and Fired

Independence and objectivity are ​hallmarks of great internal audit functions and the professional men and women who lead them. Against this backdrop, the prevailing model for the profession mandates the establishment of separate functional and administrative reporting lines that foster that independence and impartiality.

From my experience, heads of audit are less likely to be unduly influenced by management when they have a strong functional reporting relationship to the board or audit committee. Without such a relationship, it is very easy for management to confine the scope of internal audit’s work and to suppress any unfavorable results.

Recent data from the 2015 Common Body of Knowledge Global (CBOK) Practitioners Survey offers encouraging news about the progress being made along this front, with more than 70 percent of respondents having a functional reporting line to an audit committee or the board of directors.…

February 29, 2016

To Be “Agents of Change,” Internal Auditors Must Embrace Change

One of my favorite quotes in motivating internal auditors of the urgency to change when warranted is drawn from the Danish philosopher Soren Kierkegaard, who noted, “All change is preceded by crisis.” While I do not believe the profession faces a full-blown crisis in 2016, there are certainly imperatives to change as there always are for professions that are growing and evolving.

A great resource to gauge what those imperatives are is The IIA’s annual North American Pulse of Internal Auditfrom the Audit Executive Center, which has become an important tool for CAEs who have come to rely on its trending data.…

February 22, 2016

Five Powerful Statistics About Internal Audit From CBOK 2015

The IIA Research Foundation undertakes a global survey every five years to assess the state of the practice of the internal audit profession. This Common Body of Knowledge (CBOK) research has been undertaken periodically for decades, and it has provided a rich window into the profession for The IIA, academic researchers, internal audit practitioners, and others around the world.

The CBOK 2015 Practitioner Survey, the third global initiative of its kind, was offered in 23 languages with participation from 14,500 practitioners representing more than 150 chapters and 106 institutes in 166 countries/territories. By the time all of the research is analyzed, more than 25 reports will be produced based on the CBOK results, all of which will be accessible and downloadable from the CBOK Resource Exchange website.…

February 15, 2016

Is Disruptive Innovation an “Uber” Risk for Internal Audit?

On a recent trip to Paris, I arrived at the airport on the first day of a taxi strike protesting Uber, the rival upstart that has upended historical urban transportation services. With no taxi service available, I ended up taking the Metro from the airport to the station closest to my hotel. Suffice it to say, it was no treat trudging the last mile on city streets with luggage in tow, even in a city as beautiful as Paris.

The experience got me to thinking, however, about disruptive innovation and the risks it poses to organizations beyond obvious issues of competition.…

February 8, 2016

Proposed Changes to IIA Standards Will Raise the Bar Again

The IIA has unveiled proposed changes to its International Standards for the Professional Practice of Internal Auditing (Standards), and announced a 90-day exposure period — Feb. 1 to April 30 — for public comment. The IIA has again proposed numerous changes that will raise the bar for the internal audit profession. I encourage every internal audit​ practitioner to review these important proposed changes, and to weigh in by participating in the survey.

I’ll go over some of the proposed changes below, but I’d like to make a point about the crucial role that the Standards play in the day-to-day operations of internal audit functions around the world.…

February 1, 2016

Risk, No Action” Doesn’t Justify “Risk, No Audit”

A recently released EisnerAmper report, Concerns About Risks Confronting Boards – 2015 Survey, includes an interesting warning the authors describe as “risk, no action.” The report identifies reputational risk, cybersecurity, and regulatory compliance as the top three risks driving concerns among board members. No real surprises there. But there remain troubling gaps between what board members acknowledge as risks and the actions they or management take.

For example, while identifying reputational risk as the top risk, the survey found little board knowledge about one of the biggest vulnerabilities to organizational reputation — social media. According to the survey, just 6 percent of board members feel they are well-versed in social media risk.…

January 25, 2016

What 2015’s Top 10 Blogs Tell Us About Internal Audit

I have written many times in this blog of the challenges and opportunities that a dynamic and fast-paced global marketplace creates for organizations and the internal audit functions that serve them. In 2015, I admonished practitioners to learn to audit at the speed of risk, warned of the dangers of toxic cultures, and urged us to leave our comfort zones.

Those messages appeared to resonate with you. I thought it would be interesting to recap the top 10 blogs for 2015 based on readership.

10. What Internal Auditors Can Learn From the Blizzard, Measles, and Underinflated Footballs

In January, a trio of events provided a great opportunity to discuss the risks associated with poor communications in a crisis.…

January 18, 2016

Has VW Put Its Transparency Efforts in Reverse?

When is an apology really an apology? When is contrition a reflection of true regret? When is a pledge for transparency more than just a hollow promise? These questions ran through my mind after learning of new Volkswagen CEO Matthias Mueller’s media interview at the North American International Auto Show in Detroit.

Mueller, who took over the troubled automaker shortly after VWs “dieselgate” scandal broke in September, has promised transparency and to “leave no stone unturned” in getting to the bottom of the scheme. Yet, there he was telling National Public Radio’s Sonari Glinton that the scandal was a “technical” issue, despite earlier admissions that the automaker created sophisticated software designed to make its diesel vehicles appear to run cleaner in emissions tests than they do on the road.…

January 11, 2016

Internal Audit: More Than Brakes, It’s Part of the Navigation System

I am always on the lookout for clever ways to describe internal audit’s role in an organization. Elevator speeches are fine when you have 60 seconds to describe the value your profession brings to an uninformed bystander. However, an elevator speech doesn’t hold a candle to a well-crafted sound bite that will leave a lasting impression.

One of my favorites is that “internal audit is the brakes that allows the organization to drive faster.” The reasoning behind this analogy is that brakes are a critical component in a vehicle. To be sure, they are used to prohibit a vehicle from moving.…

January 4, 2016

Five Resolutions for Every Internal Auditor’s List in 2016

New Year’s resolutions typically are made in the midst of good feelings surrounding the holidays as we look back at the past year’s accomplishments. That’s what makes them tricky. We set lofty personal goals for weight loss or quitting bad habits or being more productive at work at a time when we are most nostalgic and well-rested. I try to approach my resolutions related to work realistically, understanding the limitations of time, resources, and energy. That’s not to say they are made without some ambition and optimism.

This is the mind-set I used to identify “5 Resolutions for Every Internal Auditor in 2016.”…