09
May
13

Is internal auditor the protagonist or antagonist?

Being part of the internal audit profession, I am always curious to find out what is inside the minds of the management whom I audit.  Whenever I get a chance, I try to figure out their personal expectations from the function of internal audit.

Recently, at the sidelines of a conference, I got an excellent opportunity to interact with one of the CFOs from a leading manufacturing company based in my city. As he was sharing his experiences with internal audit, I penned down the personal views of that CFO about the internal audit profession.

His first encounter with the internal auditors was back in the early 80′s while he was working as a finance manager for an automobile company. The Accounts Payable process was selected for review and most of the areas selected for review happened to belong to his division. He remembered the enormous amount of activity that went into preparing for the audit, how every document was double checked and triple checked to make sure that every deviation is fixed. And in the process of preparation, missing documents were completed, back dated and inserted into the files, left out signatures were obtained and by the time the auditors turned up everything looked perfect.  As expected, the internal auditors seemed happy enough to check off that they were able to receive everything they expected. That first experience has paradoxically shadowed his opinion on the value addition by internal audit for almost a long time.

However, subsequent to that first bizarre incident, he had faced many more internal audits in various capacities throughout his career in several organizations. Some of his key thoughts from his professional journey:

  1. Meeting some brilliant and extremely efficient internal auditors along the way, he has also come across some incompetent internal auditors in his assignments. In his experience, not all the internal auditors were competent enough. (As I heard this, I had the immediate impulse to refute his statement but continued listening to him silently to elucidate more views!!!)
  2. In several organizations, there is an unhealthy fear of auditors. There is often a fear (even though a misconception) that if any major issues are unearthed someone’s head will be cut off. Internal audit is viewed as a brute police force and no one ever want auditors to poke the nose into their work.
  3. In his experience, he had faced internal auditors who stay at one organization for years but fail to keep their skills updated or relevant. Such auditors did not develop the perspective of understanding how organizations run their businesses and how the competitors/ counterparts in their industry are managing emerging risks. As a result, they failed to provide innovative/ creative solutions through their audit. Internal audit was not seen as adding value, but creating needless interruptions to work.
  4. So, is internal audit viewed as part of the problem? or part of the solution?  Until internal audit is accepted as part of the solution by all the stakeholders, he believes that it will remain to be a problem.  Until business process owners develop an understanding that inculcating a healthy attitude and vibrant conversations with their auditors will only assist and not hurt them, it will continue to be a problem.

After the end of conversation with CFO, I was in a quandary.

  • Where do internal auditors fail to bridge the gap with management?
  • What makes internal auditors always ‘a thorn in the plant of roses’?
  • Why are the internal auditors perceived as ‘human beings with two horns and one tail’?

Though the nature of internal audit profession is prone to resistance across the organizations globally, I am still wondering how trust can be built so that unwarranted apprehensions over internal audit are removed from the minds of various stakeholders.

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