May 2023 is going to be a month for the history books! Not only does the month start out strong with Star Wars Day (May the fourth be with you) and end with the release of my book, Beyond Agile Auditing: Three Core Components to Revolutionize your Internal Audit Practices, but it is also Internal Audit Awareness month.
With the recent buzz in the news about Silicon Valley Bank and FTX (just to name a few), inevitably the topic of internal audit comes up with the buzz. Time and time again, there seems to be a general misunderstanding of what internal audit really does and its role in the broader organization. What better timing than Internal Audit Awareness Month to help bring clarity to this confusion?
In recent article on Forbes.com, Tomas Laurinavicius states that "Internal auditing is when the company's finances are audited by accountants who work for that company. It's typically done by tax, financial or managerial accountants, depending on the audit's purpose."
While auditing financial statements may be part of an internal auditor's activities, it isn't their sole or even the primary purpose. In fact, the Institute of Internal Auditors (IIA), which is the authoritative standard-setting organization in the field of internal auditing, defines internal audit as "an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes."
Nowhere in there does it state that the purpose is isolated or should be focused on an organizations financial statements.
Another misconception about internal auditors is that they are the corporate enforcers that are out to get you and they get paid by the number of gaps they identify. This also simply isn't true. The IIA defines the mission of internal audit as follows: "to enhance and protect organizational value by providing risk-based and objective assurance, advice and insight." That means the internal auditors are there for the purpose of enhancing and protecting organizational value, not to make anyone look bad. I often tell my clients that we audit processes, risks and controls. We don't audit people or teams, and we certainly aren't out to get you.
But then what value does Internal Audit provide to their organization?
Internal auditors provide value to their organizations by bringing a fresh, impartial perspective. While external auditors also bring that fresh impartial perspective, internal auditors also have shared goals with the rest of the organization, which uniquely positions them to add value.
Internal auditors leverage that fresh and impartial perspective to evaluate things like the effectiveness of controls and adherence to policies, and they also provide insights on how to improve controls, processes, etc.
We can overcome these misconceptions of internal auditing together. Internal auditors, my call to action for you is to connect with your clients outside of an audit (if you don't already do so). Grab coffee with them and get to know them without the context of an audit hanging overhead. This brings the human element into what we do and helps our clients see us for who we really are, not who they might fear we are.
Audit clients, my call to action for you is to reach out to your auditors and connect with them. I'll suggest coffee again (it's my go-to for connecting and caffeinating). If your experiences and perception of internal auditing are more closely aligned with some of the misconceptions that are out there, rather than with the true definition and purpose of internal auditing, ask your auditors to explain what it is they do and how they add value to the organization.
For both of you (auditors and audit clients) I challenge you to find ways to work together to add value to your organization. You both want the organization to succeed, right? Why not leverage your unique strengths to work together to help the organization succeed?
Join me in celebrating all that this month brings. What better way to celebrate Internal Audit Awareness Month than by giving your favorite auditor or audit client a copy of Beyond Agile Auditing, the book that will change their audit experience forever?
Click here to order your copy.