Balanced Internal Audit

The goals and objectives of Internal Audit department should be capable of being accomplished within specified operating plans and budgets, and to the extent possible, should be measurable. Frustrations at all levels are frequently due to the lack of clearly defined objectives and delegated responsibilities. The result can be mechanical auditing even when possessed with latest knowledge or technological skills just in order to meet the activity targets and creating the final output. Read the extract from a chat which I had recently with one of my professional friend working in the Internal Audit department of a multinational company.

Vimal: Hi, how are you?
Me: I am fine. How was your training?
Vimal: Cool. I have learnt some data analytics at the training.
Me: Are you going to use the learnt techniques in your IA job?
Vimal: May be to some extent to justify the training.
Me: Why so?
Vimal: I think we are more into designing our final presentation to the Audit Committee than to find trends in the business data.
Me: But that must help you to find the problem areas for reporting.
Vimal: Yes, true. But see, the experienced people in our audit committee think they know how IA has to be done. We remain more concerned about the comments they make reading our reports in presence of the auditees.
Me: What you want to say?
Vimal: You know auditees. They turn back many times after initially agreeing to a point. We just end up fighting on the facts and the languages used in our report at the time of final presentation. Moreover, timely reporting is a big issue while getting consensus from everyone is the most difficult and time consuming aspect of our job. What to say when our audit committee is so fussy about the reporting language and quantification.
Me: What is wrong in that?
Vimal: Even the properly drafted statutes and legal documents can be misinterpreted depending on the objectives of the parties involved then what to say about our Internal Audit reports. In spite of our taking all the care to report only fact based observations, misinterpretations are inevitable.
Me: Are you saying your training should have been to improve writing skills instead?
Vimal: No Man! Training is just to know what is going on in the industry. It's good to be updated from a career perspective. Practically speaking, Internal Auditors should keep everyone happy and remain popular.
Me: So, what is your strategy?
Vimal: Get into all sort of training when your company has a training budget. On the work front, simply get the final report vetted by the management and auditees. Remove all the objectionable points and keep it clean. Praise the efforts of auditees.
Me: That's a good practice. We as an Internal Auditor should not only be finding faults.
Vimal: No Man. I am just talking about cutting it short and false praising to keep them in check so they don't create issues for us while presenting the final report.

We have allusion of a duck swimming serenely along the top of the water. Underneath the water, however, its feet move frantically to make a mile a minute.

The duck parable is relevant to our new age internal auditing as well. It can be seen that final internal report has certain observable components; namely, the Executive Summary points. This observable dimension is like the duck floating calmly on the surface of the pond. This is all that the casual observer notices. Underneath the water's surface, however, two rapidly paddling webbed feet perform the work. One of these feet is the technological skill of the internal auditor, while the other is the knowledge of innovative internal audit strategies and techniques.

Emphasizing only one of these dimensions (just the technology or just the knowledge) will result in a one-legged duck swimming around in circles. Emphasizing only the logistics of producing executive summary or the final presentation to the audit committee or the top management without much emphasizing on the above mentioned dimensions results in what can only be termed as a 'dead duck'.

The emphasis on all the three areas moves the Internal Audit toward the readiness required for keeping up with the set expectations. Technological skills are needed for high efficiency and to provide with cutting edge solutions. Pedagogical models and strategies are for building intelligent business insights and know-how as well as maintaining cordial auditor-auditee relationship. Finally, the Internal Audit team, Management team, and Audit Committee should work together to add value in real terms.