The entrepreneurial internal auditor, a new generation, a new posture, a new vision!
In some meetings with members of audit committees, from different sectors, a common point that caught my attention was the dissatisfaction of the committee with the results of the audit assessment work.
In a nutshell, the
most significant complaints revolved around the reactive attitude of the audit,
very concerned with finding mistakes made in the past, often without
understanding the root cause, generating innocuous recommendations and with
little or no impact on the organization's performance, and also the low cost
and benefit ratio of the audit, since it is not clear whether the results
delivered bring something positive, savings or process improvement.
I understand the
frustration of these directors, but I also understand that the internal audit,
often, does not receive the support or necessary guidance for the improvement
of their activities.
The audit committee
has a share of blame in this process, since, being responsible for the audit
activities, it has the obligation to give full support to the audit, in its
structure and proficiency, as well as in the approval of the annual plan,
including the definition of what will be audited object, the approach of the review
and the emphasis that should be given on its scope.
The committee is a
supervisory body, but also an advisor and guardian of good practices and
quality that must be pursued by the audit team. I will not go into this in more
depth, I will leave this topic for reflection in another article.
Let's go back to our
central point, what I called “the entrepreneurial auditor”.
You may find this
denomination strange, but it was the way found to try to convey the idea of
this new posture and new vision that the auditor must conceive and apply in his
activities. In order to understand where I want to arrive, I first need to let
you know my vision of what is be an entrepreneur means:
“Be an entrepreneur
is to do something new, realizing the opportunities, recognizing the risks and
adversities. It is the ability to transform, go beyond what is expected, in a
creative and resilient way.”
Now we will review the internal audit mission according to the IIA -
Institute of Internal Auditors, which says that the internal audit mission is:
To
enhance and protect organizational value by providing risk-based and objective
assurance, advice, and insight.
Once these concepts
are understood, we can idealize that the entrepreneurial auditor is the
mixture of these two concepts.
Now we need to take
into account that the corporate world has undergone profound changes, by
significant paradigm disruptions.
Doing business or
managing a process is very different than five years ago. Today the market is
more globalized, more technological, more innovative, more disruptive and with
a strong convergence to the digital, virtual world.
Technology allows
borders to be gradually eliminated, opening up a vast market of operation, as
well as allowing new players to enter the market only in a virtual way.
This disruptive
innovation process is challenging for any corporation, making it significantly
essential that the company has a strengthened governance structure, and that
governance awareness is the basis for an internal environment that provides
greater flexibility and adaptation of management to new market requirements.
and competitiveness, without the operation losing its essence.
It is precisely in
this boiling environment that the internal auditor, like the other managers, is
inserted.
The internal auditor
has an important role in promoting ethics and values of conduct so that this
culture is not lost during innovation processes. The auditor has the
responsibility to contribute to the organization by making intelligent appointments
that direct the necessary changes which will make either the processes or the
organizational structure more innovative, more effective and more economical.
For this, the internal
auditor must have an entrepreneurial vision, knowing and weaving a clear vision
of the dynamics of corporate business, understanding the strategic objectives
and their relationship with the organization's mission. He also needs to have a
clear view of the operating cash flow cycle of the operation so that the
strengthening of this cycle is always part of your assessments.
In addition, the
entrepreneurial auditor must comprehensively understand the corporate risks
present in the organizational and business structure, knowing their exposure,
their vulnerabilities, going far beyond just looking at the risks of
non-compliance.
The entrepreneurial
auditor must perceive the
opportunities for improvement, improvement and innovation that exist in
business cycles, in operational processes, in aligning the use of resources
with an effort to achieve the strategy.
Also, must be
proficient in the application of audit standards, in the evaluation
methodology, in the audit techniques and procedures and in the use of best management
practices.
It must go beyond the
trivial, helping management to see the actions that must be taken today so that
the corporation remains competitive tomorrow.
Finally, I remembered
a conversation with a C-Level of a business unit located in Ireland, some 25
years ago, where, in his view, the audit only served “to count the dead on the
battlefield”, and what he needed was to have an audit that would support him in
strengthening his actions so that he could win the war, with the fewest
casualties possible.
This conversation
reflected me a lot, because he was not wrong, we made reviews always looking at
the past, and very little, or almost nothing, looking at the future. This
conversation made us started to change our scope of work, in a timid but consistent
way.
In my walks in the
internal audit world, I still see that many auditors continue to “count the
dead”, looking for errors and non-conformities in the transactions carried out.
Not that it is not relevant to perform compliance assessments, but the auditor
must be much more proactive than reactive in order to assist the organization
in achieving its objectives.
Being part of a
modern, proactive internal audit, with an entrepreneurial, innovative,
participatory, collaborative, creative and resilient vision should be a goal
for any internal audit professional who wants to have a place in this
globalized world, which is increasingly volatile, complex, ambiguous and
uncertain.
The decision of where
you want to be is yours and nobody else. Only you can decide if you want to
keep counting dead, or if you want to be an entrepreneurial auditor.
So, as Jack Welch
said:
Change
before you need to do it
But Always Be happy!
Great article Eduardo! When i was internal auditor, i felt the people seeing me as executioner, but the real mission of audit, is more than compliance with rules and procedures. The real mission is act like owner, looking for the organization and peoples growth, like you described in article. Congratulations!
ResponderExcluirYes it is. Thanks
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