Five Resolutions for Every Internal Auditor’s List in 2016
January 4, 2016Has VW Put Its Transparency Efforts in Reverse?
January 18, 2016I 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. But more importantly, brakes are crucial to maintaining control of a vehicle. Of course, well-resourced, independent internal audit functions add little value if they impede an organization’s ability to take risks and achieve results. But they add value when, like brakes on a car, they empower management and the board with information to slow down or stop if critical risks lie ahead.
Reflecting on the internal audit-as-brakes analogy, I’m struck by the fact that the comparison is a bit outdated. It envisions internal audit as being primarily control-focused. Today, internal audit provides much greater value than merely a set of brakes. After all, a vehicle with an outstanding braking system can still end up in the wrong place. Brakes are great for stopping or slowing down. However, they do little to help change course.
I believe a better analogy is that internal audit is a critical component of an organization’s navigation system. Consider the value of a modern navigation system. Once the departing and arriving locations are entered, a navigation system provides timely and crucial feedback on the progress of the journey. The friendly voice provides turn-by-turn advice on reaching the destination. It recognizes when a turn has been missed, and quickly alerts the driver to “make a legal U-turn.” It can be programmed to recommend routes that are faster, less congested, or avoid tolls. Some alert the driver when the speed limit is being exceeded.
Much like the navigation system in a vehicle, internal audit shows its powerful value by:
- Providing assurance that the organization is progressing on the course charted by management and the board.
- Providing recommended corrective actions when the organization is off course (please make a legal U-turn).
- Identifying risks in advance (much like a navigation system warns of congestion ahead).
- Alerting management and the board of compliance risks/failures (think excessive speed).
- Providing assurance that the organization has “arrived at its destination.”
In 2015, The IIA adopted revisions to the International Professional Practices Framework (IPPF), including 10 Core Principles that, when present, articulate internal audit’s effectiveness. The ninth of the core principles states that internal audit must be “insightful, proactive, and future-focused.”The brake analogy is counterintuitive where proactivity and future orientation are concerned. However, navigation systems are designed precisely for such purposes.
Granted, this analogy may be oversimplified. Strong internal audit functions add value beyond assurance and advice. However, I find it is useful to think through analogies such as this one so that I can better articulate internal audit’s role in ways that everyone can understand.
I welcome your thoughts.
I welcome your comments via LinkedIn or Twitter (@rfchambers).