The audit profession: Center stage
This article was originally published in IIA's Journal 'The Internal Auditor' and is being republished with special permission.
Auditing, in general, has received mixed reviews in light of last year's series of corporate failures. Although internal auditors have not been specifically implicated in any of the recent financial- reporting incidents, these events have nonetheless put somewhat of a damper on our reputation in the minds of clients and the general public. And, although more and more people are beginning to appreciate the value of internal auditing in helping to prevent future Enrons and maintain good governance, the profession could still benefit from – and is perhaps long overdue for – an image makeover.
As individual auditors, we can help alter external perceptions and revitalize the look of internal auditing through proactive measures aimed at correcting misconceptions. By reaching out to our clients and local communities, we can spread the word about the positive contributions made by audit practitioners and the key role internal auditing plays in ensuring business success. Following are actions that every internal auditor can take, either individually or in conjunction with his or her audit department, to improve the profession's image. Each of these strategies focuses on altering the face of internal auditing and spotlighting the considerable value that we can add to our organizations and the business community at large.
INSIDE THE ORGANIZATION
The task of professional-image enhancing begins within each auditor's own work setting. Several intra-organizational activities can help auditors build better relationships with clients and change external perceptions.
1. DEVELOP A MISSION STATEMENT. An internal audit mission statement should serve not only as the department's guiding principle, but also as a marketing tool. On the one hand, an effective mission statement establishes the department's organizational goals and provides a point of reference for managerial decisions. At the same time, however, the statement represents an opportunity to promote internal auditing as a valuable resource to the organization. It should therefore function as an outwardly directed message of the department's importance to achieving organizational success.
At BankFirst, the mission statement created by our internal audit department reads as follows:
The audit department will seek to add value by promoting a control environment through open communication, professionalism, expertise, and trust.
We chose a statement that encapsulated our primary role as risk evaluators, but also wanted to highlight our goal to add value to the organization. In addition, we wanted the statement to reflect our customer-service-oriented approach to auditing. By including the words promoting, and open communication, we intended to emphasize our commitment to working with clients, rather than dictating to them or delivering criticism. We also felt it was important to stress the importance of trust – a concept that helps to convey the cooperative nature of the audit process. Overall, the statement projects a positive image for the department and serves as a true reflection of our approach to auditing.
Although crafting an effective statement represents an important step toward shaping the department's mission, it does not complete the process. Once you've developed a mission statement, do not simply file it away in a desk drawer. Instead, make sure the statement is visible to both audit personnel and clients. Create posters for prominent display in the audit area and desk displays for each team member. Include the mission statement in audit training manuals and in formal presentations to management. Furthermore, be sure to “live” the mission statement rather than treating it as a theoretical ideal. Clients will believe the statement only if your audit group adheres to its principles and follows them consistently.
2. TAKE THE MYSTERY OUT OF THE AUDIT PROCESS. Clients often fear what they don't understand. Furthermore, they may not appreciate the value of an activity that is not fully explained to them. To alleviate any confusion or misconceptions about internal auditing, develop a white paper that clearly describes how internal auditing works.
The white paper should provide a detailed description of the audit process, including planned time frames, objectives, conflict- resolution procedures, and an explanation of the internal audit authority granted by the audit charter. Flowcharts and visual descriptions can be helpful as a means of illustrating concepts and procedures (see, for example, “Excerpt From BankFirst Audit White Paper,” page 53). In addition, you may want to describe auditing's expectations of the client, as well as the potential benefits of a review.
Once clients understand the roles, responsibilities, and processes associated with internal auditing, they will be more likely to see the audit as a positive, constructive activity. As an added benefit, the white paper may increase the effectiveness of audits by enhancing client cooperation.
3. CREATE AN INTRANET PAGE. Company intranet systems provide an excellent platform for communicating with clients and promoting auditing's services. Internal auditing can use its company's intranet to provide clients with convenient access to information such as the department's mission statement and white paper, published audits, personnel biographies, and audit resources available on the Internet.
Among other items, BankFirst audit team's intranet site provides descriptions of the services offered by the department, including regulatory and compliance reviews, research, and policy and procedure evaluation. In addition, the site features a planned audit schedule that lists tentative time frames for each assignment and allows management to view past published audit reports in PDF format. We also included a five-question “fun quiz” that tests visitors' knowledge of bank policies, audit processes, and regulatory/compliance issues. Our fun, interactive Web page helped increase user interest in the content and encourage repeat visits.
To further promote internal auditing's work, future additions to the BankFirst audit team's intranet site may include excerpts or quotes from post-audit surveys that describe clients' positive experiences with the audit process, allowing personnel throughout the company to see how auditing's services have benefited their coworkers. In general, internal auditing tries to enhance the site continually with features that highlight the department's vital role in the organization and demonstrate its record of success.
4. MAINTAIN REGULAR CONTACT WITH CLIENTS. The best time to develop a strong relationship with clients is between audits. Simple gestures such as passing along news articles and regulatory information as you become aware of them – not just during engagements – can help maintain client contact and build a foundation of trust. Clients will appreciate the assistance in staying informed, as well as auditing's efforts in helping them avoid risk.
You may also want to consider performing business-unit process observations between audits to better understand the clients' jobs and to remain informed of any changes since the last review. In addition, keep abreast of current developments by taking clients out to lunch occasionally, if allowed by company policy. Or, if time is limited, a simple e-mail or phone call can also help keep the lines of communication open.
Are you asking clients, “How are things going?” or “Are there any concerns in your area?” on an ongoing basis? The process of “management by walking around,” or casually visiting clients' offices and chatting informally, can help auditors remain abreast of business-unit developments and stay on top of audit concerns, as well as minimize or avoid issues that could potentially strain audit- client relations down the road.
5. PROVIDE CONSULTING SERVICES. Although consulting has only recently gained profession-wide recognition as an important internal audit competency, many effective practitioners have always consulted after fulfilling their primary role as risk and control evaluators. Such auditors have likely noticed that consulting services not only help ensure the audit function adds value, but also contribute to a more positive image of the profession. Consulting enables auditors to ensure customer satisfaction and encourages clients to see internal auditing as a way to improve business processes.
Although audit consulting has many potential rewards, effective practice requires a sound approach. The key to successful consulting work is to fully understand clients' processes and objectives. Obtain as much information as possible from each level of management to ensure adequate familiarity with the client's business unit. Ask questions such as, “What are the measurements or metrics of success for the department?” or “What measurements are used to determine whether or not the business objectives have been met?”
Accumulating business-process knowledge from each business unit adds to auditing's “big-picture” company knowledge and ability to provide meaningful contributions as consultants. In fact, value- added recommendations are often the result of leveraging knowledge gained in one area of the business across other audited units. Once you obtain a stron\g grasp on processes and objectives, your audit expertise should show through to the client with recommendations that will improve efficiency and effectiveness.
6. DEVELOP A WIN-WIN APPROACH TO AUDIT FINDINGS. Take a hard look at your department's method of presenting audit findings and determine whether or not the process unnecessarily focuses on management instead of issues. Although you should never minimize findings or neglect your obligation to report accurately, too many audit shops needlessly drive a wedge between themselves and management by presenting findings in a way that belittles the client.
Instead of emphasizing the identification of problems, treat findings presentation as an opportunity to facilitate improvement. If possible, use the expertise gathered at your status or closing meeting to develop an action plan that will address the audit concern. In essence, the action plan should anticipate management's response to findings and help turn findings presentation into a constructive process rather than a barrage of criticism. The plan may also reduce the time required to chase down issue status, helping to minimize an activity that can often damage auditor– client relations.
Treating findings as an opportunity for issue resolution will encourage clients to begin thinking of internal auditing as a “coach” versus a “cop.” In time, management will begin to develop an appreciation for how the audit process truly is designed to help the business meet objectives.
ACT LOCALLY
Much of the work required to change negative perceptions of internal auditing lies beyond the walls of the organization. Help educate your community and correct any misconceptions about the profession by taking the following actions.
7. SPEAK AT A LOCAL COLLEGE OR UNIVERSITY. College professors often appreciate classroom visits from local professionals who can speak to students intelligently about their field and share insight from a “real world” perspective. Auditors can volunteer to speak at an accounting or business class to help educate students about the true nature and value of the profession.
Students should realize that, despite stereotypes associated with internal auditing, auditors are not “bean counters” or corporate police officers. Take the opportunity to clear up any misconceptions. Explain that internal auditing is a dynamic and challenging profession that offers practitioners substantial opportunities for growth and reward. Tell students that auditors provide a vital service to the organization through activities such as risk-management, assurance, and consulting.
Be sure to also mention internal auditors' involvement in fraud prevention and detection, as students will likely be intrigued by descriptions of forensic auditing techniques, stories of investigations, and the discussion of the technology tools used to fight fraud. Speaking about information-security audits may also gain students' attention, given the high interest in technology- related careers among today's undergraduates. You can also discuss recent high-profile corporate disasters, such as WorldCom and Enron, and explain how strong internal audit departments can help ensure these situations don't occur in other companies.
Don't forget to bring “free passes” to your local HA chapter meetings for students who would like to become involved or learn more about the profession. In addition to helping change perceptions about internal auditing, your efforts may spark an interest in the profession and encourage future graduates to enter the field.
Treating audit findings as an opportunity for issue resolution will encourage clients to begin thinking of internal auditing as a “coach” versus a “cop.”
8. PARTICIPATE IN YOUR LOCAL TRADE GROUP. Although you may have already joined The IIA, consider also becoming involved in your local Institute chapter or affiliate. Even if you don't have much time available to contribute, there is usually a need for all levels of commitment.
The IIA has always been a strong advocate for the profession, and local chapters frequently contribute to image– boosting activities. Lending support to this cause will enable you to play a part in changing perceptions and increasing awareness. Plus, a strong local HA chapter speaks volumes to your business colleagues, sending a message that internal auditors belong to a committed group of professionals who aspire to high standards of practice and base their recommendations on sound principles, not arbitrary criteria.
9. WRITE A LETTER TO THE EDITOR. Local newspapers provide an ideal forum to advocate the benefits of internal auditing. Auditors can use the reader-feedback “Letters to the Editor” or “Op Ed” columns to discuss recent business news or trends from an internal audit perspective. For example, the next time a story regarding corporate failures, fraud, or questionable accounting practices appears in the paper, write a response that discusses the importance of internal auditing in today's organizations and position the audit function as part of the solution to corporate malfeasance. Use this angle as a jumping-off point to discuss the considerable value internal auditing can add to the organization and auditing's vital role in ensuring business success.
Because the general public often does not realize that external and internal auditing are two separate professions, you may also want to explain the differences between them. Make sure readers understand that internal auditing is not just focused on accounting and finance issues – a common misconception among those outside the profession – and that the scope of audit work can encompass virtually all of the organization's operations.
You may also want to stress that anyone who invests in a company as a stockholder should demand a strong, independent internal audit department to assist in safeguarding their investment. Emphasize that, until investors demand change, the conditions that permitted the WorldCom and Enron situations to develop will continue to be a risk.
10. SPREAD THE WORD, ONE PERSON AT A TIME. Changing perceptions about the profession does not always require a formal setting. Everyday interactions outside the office can serve as a legitimate platform for clearing up misconceptions and educating the public.
The next time someone asks what you do for a living, for example, do not just provide a cursory response and then quickly change the subject. Instead, take the time to explain your job and to describe internal auditing's role in the organization. Acknowledge the stereotypes, but then dispel them by describing the truly dynamic and value-added nature of internal audit work. You don't have to get up on a soapbox. Just present the facts and explain the many positive contributions auditors make to the organization, as well as their increasing importance to today's businesses. Listeners will appreciate your willingness to help them understand and may even pass this information along to others, increasing the scope of your message exponentially. Never underestimate the potential of marketing by work-of-mouth.
A SUCCESSFUL MAKEOVER
Every internal auditor can act as a change facilitator for the profession, whether through small steps such as passing pertinent news information along to clients, or larger contributions like sharing audit knowledge at a business seminar. Changing perceptions takes time, and it often requires the combined effort of many individuals. Although we're starting to see some improvement in the profession's overall image, more and more auditors need to act as self-promoters to build on this momentum.
A change in attitude demonstrated by one of our clients at BankFirst illustrates the power of audit promotion. In the past, the client equated internal auditing with a visit to the dentist's office – an activity that was often painful and unpleasant for him. Now, after recognizing auditing's value-added services and benefiting from its recommendations, he is one of the audit department's biggest advocates – a direct result of internal auditing's marketing efforts and change in approach.
The same can happen in your organization, and this sentiment can spread to the general public. With enough participation from the audit community, we can ensure the profession receives a makeover that will change attitudes and promote understanding.
Once our clients understand the roles, responsibilities, and processes associated with internal auditing, they will be more likely to see audits as a positive, constructive activity.
Everyday interactions outside the office can serve as a legitimate platform for clearing up misconceptions about internal auditing and educating the public.
With enough participation from the audit community, we can ensure the profession receives an image makeover that will help change attitudes and promote understanding about the profession.
MICHAEL WILLIAMS, CIA, MBA, is a former audit manager at BankFirst in Sioux Falls, S.D., and is currently an assistant vice president at CitiGroup in Sioux Falls and an associate professor of business at National American University. He is now a part of the Institute of Internal Auditors in the USA (www.theiia.org). He can be contacted at mwilliams@theiia.org.
