Monday, March 15, 2021

When Internal Audit Is Agile And The Audit Committee Is Not!

The traditional challenge for Internal Audit was in its ability to meet and/or exceed its stakeholders' growing expectations. While some Internal Audit functions may have suffered and failed to achieve this objective,  I would like to believe that most of the functions have been successful not only in meeting the expectations but also in taking the lead and initiative to introduce change and innovation and prove their relevance!

One of the buzzwords and trends nowadays is "agile internal auditing". Internal Audit functions around the world are working on understanding what it is about, exploring what it means to their operations and how to successfully implement it in their organizations. A successful implementation requires the buy-in and collaboration of stakeholders. You would think that management and the audit committees would be thrilled when Internal Audit starts the transformation process. That would be true in most cases, but sometimes there are forces within the Organization that resist change. When these forces are management, Internal Audit can seek the support of the audit committee to convince management. But, what if the audit committee is the resisting force? Imagine a situation where a CAE approaches the audit committee with  his/her plans to implement agile internal auditing and the answer he/she gets is:

  • "This is a luxury we can't afford",
  • "Stick with the audit plan, it works", 
  • "This is not the time for a dramatic change", 
  • "We don't have the resources and/or experience to do this", 
  • " We will think about it",
  • "What is agile internal auditing?"
Does this sound familiar? If you have heard any of the above responses, you are not alone! 

What comes to your mind when you hear such a response? You may conclude that Internal Audit did not do a good job communicating the concept and benefits of agile internal auditing to the audit committee. Perhaps they did not explain that it is more of a  mindset than a methodology, that it can be applied gradually, that it is not all or nothing approach or a one approach fits all solution. The reaction of the audit committee could indicate that there is a deeper disconnect with the audit committee! You may also conclude that the audit committee members don't possess the right mindset, vision, experience, or qualification to discharge their duties in these uncertain times! 

What will be your strategy to bridge the gap with the audit committee and initiate the transformation to agile internal auditing.? Please share your experience and thoughts. And remember to:

                                                               "be agile, be alive"!

Adapgility Consulting is your Internal Audit Partner and can help with the agility transformation process.


Thursday, March 4, 2021

What Does It Mean to Be Ready And Relevant?

There is a common consensus that Internal Auditors need to be ready and relevant to succeed and thrive in the current disruptive times and to be ready for what comes next in the highly unpredictable future. Last August, I wrote a post entitled " Has Your Internal Audit Function Tested Positive For The Irrelevance Virus" in which I offered internal auditors some basic suggestions on how to get vaccinated against the irrelevance virus including:
  • working on their mindset
  • keeping an up-to-date understanding of the company's objectives and business
  • understanding the stakeholders perspective on value internal audit can add
  • transforming to agile auditing
  • understanding the true essence of the internal audit independence concept
  • communicating what matters in real-time
  • utilization of available technology to its fullest potential
  • taking a tablespoon of the "courage syrup" three times a day! 
You can read the full post by clicking on the link above.

Recently, I have attended a webinar sponsored by Workivia. The webinar took the form of a live discussion with Tim Berichon the author of the book " Ready and Relevant - Prepare to Audit What Matters Most ". While I have not read the book yet, I thought the discussion with Tim offered a good summary of his thoughts. The key takeaways from the webinar, at least as I understood it, are as follows:

  • Stakeholders want to see internal audit become relevant and they now see how internal audit can perform
  • Internal audit leaders have stepped up and taken their independence hat off and not allowed that to be a barrier or stopping them from being most relevant
  • Relevance is about survival at the internal audit level and the business level
  • The top barrier to agility and innovation was the internal audit team's resistance to change. Internal auditors need to look in the mirror and ensure they have the right mindset and the commitment to that mindset
  • Get in the middle of the ERM fan! Internal audit leaders can own the risk management programs
  • Automate everything you can. Free up internal auditors, they can not add value unless they can use their brains
  • Automation can not replace soft skills yet
  • Artificial Intelligence as it starts to be  more affordable may creep into the internal auditors' world in the future
  • Tell your stockholders something they do not know, If you tell them what they know, you are irrelevant.
  • Internal audit will never be irrelevant if it helps management meet its objectives
  • Drop the word added from the phrase"value-added".Everything internal audit does should be a value, it does not need to be added to anything
  • Set aside a certain percentage of internal audit time for management request and flexibility
I encourage you to watch the entire webinar, it is available on-demand and can be accessed by clicking on the title of the webinar as shown above.

After reading the above, do you think you know what being "ready and relevant" really means? How do you define it and communicate it to your stakeholders? What do you do to achieve the "ready and relevant goal? Let's start a dialogue and share experiences. 


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