2017

July 31, 2017

Internal Auditing and the Fourth Industrial Revolution

I was recently quoted in a Forbes magazine article on whether artificial intelligence (AI) could one day replace the internal audit profession. My message was that the growing ability of sophisticated technology to monitor large and complex systems won’t replace internal auditors. Instead, it will enable them to become more efficient and effective in helping organizations solve problems and meet goals.

While I remain convinced of this, what wasn’t addressed in the article is how AI along with other digital and technological breakthroughs will fundamentally change how business is done and in turn how that will change the demands placed on internal audit.…

July 24, 2017

Internal Audit: The Future Is Now

The origin of the expression, “the future is now,” is murky at best, but it is often incorrectly credited to Korean American artist Nam June Paik. Paik, whose work with television and video in the early 1960s gained him the moniker, “the father of video art,” was quoted in Artnews magazine in 1995 urging, “People talk about the future being tomorrow, but the future is now.”

Paik was ahead of his time, and his approach to his craft is best described in his quote. He had the vision to articulate how technology and media would change perceptions and mold how we view our world.…

July 17, 2017

Managing an Internal Audit Career: How Do You Know When It’s Time to Go?

This summer, I have been taking the opportunity to share blogs from my archives that generated a lot of interest at the time they were published. This week, I reexamine the age-old question of how does an internal auditor know when it’s time for a career change.  

One of the most rewarding aspects of my job as president and CEO of The IIA is the opportunity to meet young professionals just starting their careers in internal audit. These interactions remind me of the reasons I joined the profession and they never fail to re-invigorate my own passion for what we do.…

July 10, 2017

For Internal Auditors, Real Beauty Lies in the Truth

Researchers at the University of Duisburg-Essen in Germany recently released findings from a study that looked at whether internal auditors are swayed by the attractiveness of their audit subjects. More specifically, the study looked at internal auditors’ susceptibility to “the beauty bias” in fraud-risk judgements.

The study found that experience and motivation “immunize” internal auditors to attractiveness stereotyping and the attractiveness halo effect. The theory of attractiveness stereotyping in psychology stems from studies that have found that Western people are more willing to listen to and believe people who are seen as aesthetically attractive. The halo effect is a type of confirmation bias wherein positive feelings in one area cause ambiguous or neutral traits to be viewed positively.…

July 3, 2017

For Internal Audit, the Sun Should Never Set on Independence Day

Residents of the United States celebrate the nation’s Independence Day on July 4th. For most, the holiday provides an opportunity to enjoy a day away from work, cook out with friends and family, and possibly set off fireworks, as is the American tradition.

To differing degrees, citizens of every country on the planet revel in recognition of the date when their homelands achieved sovereignty and self-determination. To be sure, there are 30 nations that have independence days in July, including Belarus, Canada, South Sudan, and Vanuatu. But I wonder, how many residents of these diverse nations actually stop to ponder their independence and what it means?…

June 26, 2017

For Internal Audit – Is the General Counsel Friend or Foe?

In a recent blog, I explored some of the sources of tension between internal audit and management. One member of the management team with whom internal audit has a particularly interdependent relationship is the chief legal officer (general counsel). I explored internal audit’s relationship with the general counsel in a May 2015 blog. In another of my summer rerun series, I thought it was timely to share the blog again.

When I first became a CAE, it didn’t take me long to realize that the relationship with my organization’s general counsel was going to be complex. I quickly found him to be a great resource as he and his team were ready and willing to help my staff with important legal advice during ongoing audits.…

June 19, 2017

Management vs Internal Audit: 5 Frequent Sources of Tension

In an ideal world, management and internal audit stand together in a common pursuit to strengthen their organization’s risk management, internal controls, and governance processes. For the most part, this alliance prevails in corporate and public organizations around the world. Despite being allies, management and internal audit do not always see eye to eye. Disagreements may be easily resolved as simple wording in an audit report, or they may be serious enough to impair internal audit’s ability to carry out its mission.

Over my internal audit career, I navigated countless disputes with management. And, as an IIA leader, I am frequently approached by chief audit executives (CAEs), or members of their staff, who say they are at an impasse with management on a contentious issue.…

June 12, 2017

Ford’s and GM’s Fortunes Offer Lessons for Internal Audit

American business icons General Motors Corp. (GM) and Ford Motor Co. recently have traveled divergent roads. While GM has seen a resurgence in the past three years, Ford’s weak stock performance of late led to a shake-up in May resulting in the ouster of its CEO. While volatility in the fortunes of automakers has become almost routine, internal auditors can learn valuable lessons from GM’s improving fortunes and the messages coming from Ford’s new leadership.

GM CEO Mary Barra has been credited with transforming the company through her innovative thinking and her commitment to leading a culture change. Less than 10 years from bankruptcy and bailouts, GM has seen a number of highly profitable quarters.…

June 5, 2017

Forecasting Risks: Internal Auditors and Approaching Storms

It is a truism among internal auditors that explaining what we do as a profession often leaves the uninformed confused. So, it was a pleasant surprise for me when I recently explained the fundamentals of internal auditing to a doctor who immediately grasped its value to the organization.

“You guys are the thunder before the storm,” he observed.

A nice turn of phrase that cleverly surmises what internal auditors do. But the more I thought about it, the more I became convinced that the phrase is just a good starting point.

Indeed, internal audit findings that point to ineffective risk management, defective design or implementation of controls, or other problems that increase risk can provide an appropriate rumble of warning to stakeholders.…

May 30, 2017

10 Things Not to Say in an Audit Report

I’m taking a short break from my blog, so I’m reposting one of the more popular posts from previous years that remains relevant to today’s internal audit practitioners. This was originally published on Oct. 21, 2011. Enjoy.

I’ll never forget my seventh-grade English teacher telling us, “It’s not what you say, but how you say it that counts.” Obviously, she was exaggerating, but the point still stands: How we say things can make a difference. A well-written audit report should be a call to action, but a poorly written report can result in inappropriate action or in no action at all.…