logo-newlogo-newlogo-newlogo-new
  • Home
  • Blog
  • Audit Trail Academy
  • Advisory Services
  • Books
✕
  • Home
  • Chambers on Internal Audit
  • Uncategorized
  • One Mistake Internal Audit Cannot Afford to Make in 2020

One Mistake Internal Audit Cannot Afford to Make in 2020

Internal Audit Alert: The Next Battlefield May Engulf Your Cyber Networks
January 13, 2020
Are Assaults on Truth Hastening a Doomsday?
January 27, 2020
January 21, 2020

One-Mistake-Internal-Audit-Cannot-Afford-to-Make-in-2020

One of the 2020 resolutions I wrote about at the beginning of the month addressed the need for internal audit to communicate its value. This should always be front of mind for internal audit leaders, as failure to do so can prove disastrous during economic downturns.

Now in my fifth decade in the internal audit profession, I have experienced economic recessions in the 1970s, ’80s, ’90s, 2000s and the 2010s. While the cause and extent of each recession was fundamentally different, each had a similar impact on our profession: Internal audit bore a disproportionate reduction in its ranks, because it was often seen as only a convenient “bill payer.”  Our stakeholders, who were under pressure to reduce costs and shore up the bottom line, didn’t fully comprehend the value that internal audit delivered before the onset of the economic downturn. 

So, what does all of this have to do with 2020? The International Monetary Fund’s January 2020 World Economic Outlook forecasts global growth this year at 3.3%, up slightly from 2.9% in 2019, with advanced economies also expanding minimally, up 0.7% in Japan and 1.3% in euro areas of Europe to 2% in the United States.

I’m neither predicting nor inviting an economic downturn, but let’s face it: A downturn is inevitable. That’s why internal audit leaders must be prepared to communicate internal audit’s value now, not when a downturn is upon us. That is one mistake internal audit can never afford to make.

Successfully showing our value is more than what we say. Indeed, it is all about delivering on that promised value. I’ve written extensively on how internal audit adds value, including dedicating chapters in two of my books to the subject. In my first book, Lessons Learned on the Audit Trail, I included a “Life Lesson” that provides particular insight on this subject:

“Your key stakeholders have the last word on whether you are doing your job well. And they judge an internal audit function not by how well-run it is, but by the value it generates for them.”

So, how does internal audit communicate its value? There is no simple answer, but I have identified five strategies that every internal audit department should be embracing:

1. Obsess about the value we deliver. This one may seem obvious, but we can’t promote what we are not doing! I have seen countless internal audit departments that were simply “checking the box” in executing their mission. Those internal audit departments were sitting ducks when the economy soured. If we are not proactively identifying and following the risks, chances are that we are not creating value. 

2. Communicate incessantly about the value we deliver. As internal auditors, we are often averse to informal, unscripted communications. Management and audit committees can discern value in individual audit reports, but they often fail to connect the dots. If the cumulative effect of our work has been to deliver savings or cost reductions, then it is incumbent upon us to shine the light on what we have done.

3. Don’t be afraid to market.One of the age-old debates surrounding our profession is whether we should market our services. The fact is, we have an obligation to create awareness about what we do, and the potential we have to deliver even greater value. Whether we call that marketing or creating awareness on the part of our stakeholders, I call it an essential strategy.

4. Understand what makes our stakeholders tick. As a newly minted chief audit executive (CAE) many decades ago, I found myself with a new CEO or chief financial officer about every 18 months. Audit committee chairs likewise rotated in and out of their roles. I soon discovered that each of them had their own priorities, and that each of them judged the value internal audit delivered based on their “value premise.” Some wanted us to simply focus on financial controls, while others wanted us to focus much more broadly on risks facing our organization. Each time a key stakeholder changes, we must make sure we have a conversation about the value internal audit does and should deliver. Never forget that, as consumers of internal audit services, these stakeholders make decisions on the perceived value they are receiving. When our budgets demand it, we stop buying products and services in which we don’t find ample value. I address relationship building and acumen in the second edition of Lessons Learned on the Audit Trail, titled The Speed of Risk. The chapter on relationship acumen addresses the need to devote the time and effort to care for those relationships:

Successful CAEs understand that, even in the best of circumstances, the process of building and sustaining relationships is a never-ending task. Senior executives come and go or change hats, and the audit committee roster changes. The CAE must reach out early and often when personnel change. Tending to long-standing relationships is also imperative. Picking up the phone or extending a lunch invitation to talk through a touchy issue pays enormous dividends to the CAE and the entire internal audit staff.

Building trust and understanding in others requires an investment of the CAE’s time and energy, in part because the needs and expectations of key stakeholders are constantly evolving. Successful CAEs recognize the signs of change and recalibrate as necessary.

5. Seek feedback and adjust.As I have observed many times, complacency is the enemy of good. I have watched as good internal audit departments continued to do what brought them success without adapting to new stakeholders, evolving risks, strategic risks facing their organizations, or macroeconomic circumstances. Internal audit delivered what was perceived to be of significant value in the mid-2000s when it focused on Sarbanes-Oxley controls in the U.S. Within three years, the global economy crashed. The way we delivered value in 2010 was vastly different from the value we delivered in 2007.

I hope that I am wrong, that we won’t have to fight the downsizing battle again for years to come. But as I learned as a civilian student at the U.S. Army War College more than 25 years ago: If we don’t prepare, chances are that we won’t win the battle.

As always, I look forward to your comments.

Share

Related posts

January 31, 2023

Recent Advice on Hiring Internal Auditor’s You Can ‘Trust’ Is Misdirected


Read more
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

Leave a Reply Cancel reply

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

What’s Trending

01-31-23

Recent Advice on Hiring Internal Auditor’s You Can ‘Trust’ Is Misdirected


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?


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