logo-newlogo-newlogo-newlogo-new
  • Home
  • Blog
  • Audit Trail Academy
  • Advisory Services
  • Books
✕
  • Home
  • Chambers on Internal Audit
  • Uncategorized
  • Five Red Flags Your Internal Audit Department Is Losing Stakeholder Support

Five Red Flags Your Internal Audit Department Is Losing Stakeholder Support

What the Equifax Settlement Signals About the Importance of Internal Audit
July 9, 2018
Beware of Auditing up the Wrong Tree​​
July 23, 2018
July 16, 2018

Red flag on a beach waving above blue sky

Early in my career, I took for granted that internal auditing existed simply because it was necessary. Very rarely did anyone use terms like customers or stakeholders. I don’t remember ever hearing those terms during my first decade in the business.

I knew that regulations of the U.S. Army, where I worked at the time, required that every activity have an internal audit function, so I assumed we were there simply because we had to be. Resources were plentiful, and no one was really scrutinizing the value that we delivered, which isn’t surprising. People generally don’t begin to question the value of something until it becomes difficult to pay for it. However, all that changed when Army budgets started being reduced. Stakeholders who weren’t happy with internal audit were not reluctant to signal their displeasure.

Stakeholder support is vital to internal auditing’s ability to add value and contribute to the organizations we serve. When chief audit executives and their staff are not meeting stakeholder expectations, there are typically signs or early indications that the support we might have enjoyed in the past is starting to slip.

I saw this scenario play out many times during my years of working with and advising internal audit functions. I have likewise seen it occur in the corporate sector. Like many of my colleagues, I’ve also taken over internal audit functions where my predecessor had lost that connection with stakeholders.

Several years ago, I shared my insights on this topic, and they largely hold true today. I’ve seen the signs. I know what they look like, and I thought I’d share my updated perspectives on these signs with you.

1. Lackluster response. If you’re having trouble getting stakeholders to respond during the annual risk assessment, that’s a problem. Virtually all executives and board members have things that keep them “awake at night.” So if they aren’t sharing their concerns with you, it could mean they don’t trust you to act on them or don’t think your team has the ability to address them.

As an internal auditor, you go through this process at least annually, though I hope you have designed a continuous component to enable you to audit at the speed of risk. If your stakeholders don’t appear interested in the risk assessment, offering you little or no food for thought, that’s not a good sign. It may mean they view your risk assessment as irrelevant. Perhaps they have gone through the process with you before but concluded that nothing had come of it.

2. The phone never rings. Yes, this is a throwback to an earlier time, not that long ago, when we used phones a lot more than we do now. Email or text messaging may be your main form of business communication these days. Regardless of method used, if no one is reaching out to internal audit to ask that you address an emerging risk or evaluate a developing situation, it’s likely your stakeholders don’t see you as responsive or a resource. Delivering value is the key to long-term success for any internal audit operation. If top executives and business unit leaders don’t think internal audit adds value to the organization, they won’t seek you out when a problem arises.

3. Breakaway republics. When business units start creating their own audit teams — or elements within a unit that duplicate the capabilities of internal audit — chances are you’re not living up to their expectations. When different business groups within an organization come to the conclusion that internal audit isn’t serving their needs, they may start to set up review functions of their own. They may not call them internal audit, but they do the same kind of work. That’s a sign those stakeholders don’t see the value of internal audit or don’t think it can be trusted.

4. Resource reduction. Companies invest in what they value. If an organization is cutting back across the board, that’s one thing. But if your budget is slashed disproportionate to other departments, that’s a pretty clear indicator that you do not enjoy the level of stakeholder support that you need. After all, a strong internal audit function focused on cost reduction and containment can be worth its weight in gold when organizations are facing inordinate pressure on the bottom line.

5. The external quality assessment isn’t your idea. IIA Standard 1312: External Assessments requires external quality assessments of internal audit departments at least once every five years. The internal audit department should always be the one proactively pushing for that assessment.

If your stakeholders independently initiate a quality assessment, it is likely they have concerns about your department and are looking for validation. If you haven’t had an external quality assessment for a few years, and you get a call from the CEO, the chief financial officer, or even the audit committee, and they say, “We’d like you to get a quality assessment,” you need to be concerned. Worse yet, if they take the lead in identifying who is going to perform the assessment, that is the clearest sign possible that something is seriously wrong between your function and its stakeholders.

So after identifying some telltale signs of trouble, the question becomes: What can you do to get back on track when one or more of these signs appear? Anyone who knows me won’t be surprised by my answer. I think the best way to start is to acknowledge the elephant in the room and say, “I understand that we may not be meeting your needs and expectations, and we are recommitting ourselves to doing a better job.”

Seek clarity. Get honest feedback on your strengths and weaknesses and enlist help from stakeholders in making the internal audit function more effective. Vest them in your positive outcome. It’s not enough to simply declare that you are going to do better. You need to engage your stakeholders in the process.

The rehabilitation process can be difficult. But recognizing that you’ve got a problem is half the battle.

What do you think? I’m sure some of you have had to deal with a crisis of confidence, or observed one at another organization. How did it play out? I’d love to hear your ideas on how an internal audit team that has fallen out of favor can reconnect with its stakeholders.

Share

Related posts

March 13, 2023

New IIA Report Is a Timely Benchmarking Resource for Internal Auditors


Read more
May 16, 2022

THE STAGGERING TOLL OF COVID RELIEF FRAUD: WHERE WERE THE THREE LINES?


Read more
February 3, 2022

To Live a Life in Color, You May Have to Change Channels


Read more

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

What’s Trending

03-20-23

New Report Reveals Surprising Insights from Internal Audit Executives


03-13-23

New IIA Report Is a Timely Benchmarking Resource for Internal Auditors


03-02-23

6 Things Audit Committee Members Often Won’t Say to Internal Audit


Read More

Archive

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009

Contact Us

PO Box 1441
New Smyrna Beach, FL 32170

+1-407-463-9389
rchambers@richardchambers.com

About AuditBeacon.com

AuditBeacon.com is a resource center for internal auditors and risk professionals from around the world. In addition to more than 500 blogs authored by Richard Chambers, the site includes links to news and insights on internal audit and other information that illuminates the value of this important profession. AuditBeacon.com is provided as a service by Richard F. Chambers and Associates, LLC.

Copyright © 2023 Richard F. Chambers & Associates. All Rights Reserved.
  • Home
  • Blog
  • Audit Trail Academy
  • Advisory Services
  • Books