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!

 

 

 

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Comentários

2 comentários:

  1. 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!

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