Posts Tagged ‘understanding the business

18
Dec
13

Akio Morita and his message for internal audit

In his book “Made in Japan: Akio Morita and Sony”, Akio Morita, Co-founder of Sony describes vividly about the efforts to establish Sony in USA during its initial years.

He writes —

“I began to feel that to establish our company more firmly in the USA I had to get to know the country better and ….. I felt I needed to know more about how Americans lived and how they thought; ……..to understand Americans would be more difficult.”

 “If I were really to understand what life was like in America ………, I would have to move my family to the US and experience the life of an American.”

 I commuted to the office by bus every day, mingling with New Yorkers, listening to them talk, observing their habits almost like a sociologist.”

In his quest to establish his company in a foreign soil, Morita provides some excellent and awesome practical tips to internal audit function striving to get hold of the business which the organization is into.

As internal auditor, one thing which I hear often from our audit clients is –“Internal auditors do not understand the business!!!” The question of adding value loses focus at that point. Drawing from the analogy of Morita’s advice, internal audit functions can try the following in its quest to become the trusted advisers of the organization:

  1. Internal audit function can never restrict itself to cocoon of accounting and auditing parlance alone. It must be deliberate in getting to know the organization better through whatever (ethical) means it has in its hand.
  2. It is equally important to understand the motives and logic behind strategic business decisions and the ethos of decision making by organization’s management. (This becomes a reality when the Chief Audit Executive is able to ‘have a seat at the table’.)
  3.  Without compromising, it is imperative to maintain a fine balance between assurance and consulting assignments by the IA function. Independence does not mean that there should be outright rejection of consulting engagements. (Sometimes, consulting assignments provide immense opportunity to auditors to understand the business.)
  4.   Where appropriate, short term sabbatical to other business functions could be pursued by the IA function.
  5.  In the busyness and seriousness of internal auditing, auditors could become frantic and restless. In order to overcome this slippage, it is crucial for auditors to start being a person who can connect with the people. There can be differences of opinion between management and IA function. It is not necessary that both need to meet eye to eye on each and every issue. But, internal auditor can always ‘walk slowly though the crowd’ to know their pulse.
  6.  When auditors are able to listen more intently to people, many benefits fructify. What’s up with people bubbles to the surface rapidly. This enables auditors to be more aware of what they were dealing with. This will ultimately help auditors provide audit recommendation that makes business sense. 

Though the above suggestions may not be very scientific, I am convinced that the IA function should leave no stone unturned when it comes to understanding the business and adding value through its work.

‘Total immersion technique’ is one of the several techniques used in foreign language pedagogy. Under this approach, the student is ‘immersed’/ ‘submerged’ directly and immediately into the target language from the first opening day or hour of class.  It can be painful or unpleasant to the students initially but they learn words faster over a period of time. Similarly, internal audit function should use its earliest possible opportunity to learn and understand about the intricacies of business of the organization.  There will never be a perfect or sacred timing!!!

Question: Can the internal audit’s efforts to understand the business be made easy with any other practices? Please share them by leaving a comment to this post. I welcome your thoughts.




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