logo-newlogo-newlogo-newlogo-new
  • Home
  • Blog
  • Audit Trail Academy
  • Advisory Services
  • Books
✕
  • Home
  • Chambers on Internal Audit
  • Uncategorized
  • Internal Auditors Should Stand on Principles

Internal Auditors Should Stand on Principles

6 Risk Management Lessons I Learned From Hurricane Dorian
September 9, 2019
When It Comes to Internal Audit Principles — The Stand Must Be Complete
September 19, 2019
September 16, 2019

Internal-Auditors-Should-Stand-on-Principles

“The intelligent have plans; the wise have principles.” —Raheel Farooq

The world of internal auditing in the 21stcentury can be exhilarating, rewarding, nerve-wracking, exciting, and downright terrifying at times. The challenges that organizations face today make providing independent assurance to enhance organizational value anything but dull.

In looking back over more than four decades in this profession, I couldn’t have imagined as a junior auditor at Trust Company of Georgia how radically the profession would change during my career. The junior auditor of today can leverage new technology to examine an enormous volume of data in minutes that once took days or weeks. She can dive into understanding and evaluating organizational culture, and wrestle with serious questions about data ethics, data privacy, and data protection. What radical changes await her over the next 40 years is impossible to say with certainty, except that they will occur.

The foundation that will enable us to navigate the changes to come is the International Professional Practices Framework generally and the Core Principles for the Professional Practice of Internal Auditing specifically. No matter what changes may impact the profession, we must stand on principles. We should never lose sight of the fundamental beliefs that drive our profession and our practitioners.

The recently published IIA Practice Guide “Demonstrating the Core Principles for the Professional Practice of Internal Auditing” provides excellent direction on embracing and demonstrating those Core Principles in all aspects of our professional lives. What’s more, the guide identifies enablers and key indicators that chief audit executives (CAEs) can use to customize an approach to demonstrating the Core Principles in their audit teams.

While this blog post can’t provide the depth and detail of the new practice guide, I’d like to address how the Core Principles drive home what we do. I’ll look at Core Principles one through five in this post and six through 10 in a subsequent post.

Demonstrates integrity. The practice guide notes that integrity is the foundation of the other principles in The IIA’s Code of Ethics, and I have often written that ethics are table stakes for great internal auditors. One sentence in the guidance captures this beautifully: “In simple terms, integrity means doing the right thing and providing honest, objective assurance and advice, even when doing so is uncomfortable or difficult and avoiding an issue might be easier.” After all, as noted author Awdhesh Singh observed, “Principles are not meant so much for the easy times, as for the difficult times.”

Demonstrates competence and due professional care. Internal audit’s role in organizations continues to expand. The scope of work has grown far beyond simple assurance on financial reporting, which was the case when I started out. But we must remain true to the principle that requires our services be delivered with competence and due professional care.

There are two ways to approach this principle. The easy way is to view this as a mandate to never stray beyond areas where we have the necessary knowledge, skills, and experience to provide competent and effective service. Instead, we should challenge ourselves to view this as a mandate to expand our knowledge, skills, and experience commensurate to the demands of our organizations, while making sure we seek out competent advice and assistance in areas where we don’t yet have that expertise. 

Is objective and free from undue influence (independent).It is good to remind ourselves that objectivity and independence are not interchangeable words. The guidance provides a good definition: “Objectivity is an unbiased mental attitude that requires internal auditors not to subordinate their judgment on audit matters to others, and independence is freedom from conditions that threaten the ability of the internal audit activity to execute its responsibilities in an unbiased manner.”

This principle applies to many aspects of our day-to-day work as practitioners, from who we report to administratively to how we disclose material facts when we report on engagements. The relationships we build with our boards, audit committees, CEOs, chief financial officers, chief information officers, and others also impact our ability to provide independent assurance. Ultimately, the CAE must ensure that internal audit’s work is objective and independent, including any work from outside service providers that is relied upon by internal audit.

Aligns with the strategies, objectives, and risks of the organization. This principle is critical to showing how internal audit adds value to the organization. It should be obvious that internal audit’s work should align with the risks that have the greatest impact on the organization. Indeed, providing “risk-based and objective assurance, advice, and insight” is part of The IIA’s Mission of Internal Audit.

Is appropriately positioned and adequately resourced. This is one principle in which internal audit often focuses on only half the battle. Many CAEs are proficient at making their case for having the sufficient resources to execute the audit plan. However, too often we accept the status quo on reporting lines and other factors that can limit the effectiveness of the internal audit function. CAEs should regularly review the internal audit charter with the audit committee or full board and determine if changes in the audit function’s scope of work or reporting lines are necessary to execute the organization’s risk management strategy. 

As I mentioned earlier, I will explore the remaining five principles — demonstrating quality and continuous improvement; communicating effectively; providing risk-based assurance; being insightful, proactive, and future-focused; and promoting organizational improvement — in my next blog post.

In the meantime, I urge you to review the new practice guide and genuinely examine how you are demonstrating those foundational beliefs and principles in your work.

As always, I look forward to your comments.

Share

Related posts

January 24, 2023

Do Performance Bonuses Impair Internal Auditors’ Independence and Objectivity?


Read more
January 16, 2023

Are Internal Auditors to Blame When Boards Are in the Dark?


Read more
January 9, 2023

Follow the Leaders in 2023


Read more

Leave a Reply Cancel reply

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

What’s Trending

01-24-23

Do Performance Bonuses Impair Internal Auditors’ Independence and Objectivity?


01-16-23

Are Internal Auditors to Blame When Boards Are in the Dark?


01-09-23

Follow the Leaders in 2023


Read More

Archive

  • 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