How To Unlock Internal Audit’s Potential In Your Organisation
By Chris Young, Executive Director at Parbery Consulting
It’s fair to say that the Internal Audit department isn’t exactly seen as a go-getting part of most organisations. Indeed, most would see the department as, at best, a necessary evil and, at worst, a waste of time when there’s ‘real’ work to be done.
Part of this is due to its traditional corporate policeman role. Audits are often used as a way for a Board or audit committee to review parts of an organisation – usually as part of a risk management strategy – and are often therefore perceived as a way of checking up on managers and staff.
This is not helped when the final report contains 12 action items and areas to rectify, thus creating months of work for these same managers.
Luckily, there is an alternative Internal Audit model. It’s one that turns the usual way of running an Audit department on its head but could be the key to unlocking your Audit Team’s potential.
An example: in one of my first roles after qualifying as an accountant – as a member of the Global Audit Team of a London based telecommunications company, there was a very different Internal Audit system in place.
If we had followed the traditional model, the team would have developed a risk-based audit plan to be signed off by the Audit Committee. It would then work its way through the plan producing audits, containing recommendations to be followed up for implementation. And be passively disliked by everyone else in the organisation.
Instead, the team set itself up as an internal consultancy. And instead of producing a top down audit plan it ‘sold’ its services to the rest of the business, its only source of funds (it didn’t have its own separately allocated budget).
This model meant that the team could only survive if it provided value to its ‘clients’ and if it was seen to be worth the internal fees – set at market consultancy rates – it charged.
This transformed the standing of the team and created a virtuous circle: good, valuable work, produced more ‘customers’ for our work leading to more valuable work and so on. The team was never idle, and its services oversubscribed.
You Could Do This Too
This might be a bit radical for your organisation – especially if Internal Audit is an important part of your internal governance structure – but you could look to apply one of the main lessons:
Start to see Internal Audit as a source of valuable advice and, yes, as an internal consultancy.
If I was to suggest setting up a department full of skilled consultants, experienced in your business and available to assist with the many business issues you have, I’m sure that – cost aside – you’d jump at the chance.
Unfortunately, if you have an Internal Audit department it’s likely that you have at least the start of such a team already, but because of its name (and possibly its historical role) it’s not seen this way.
In summary, many organisations have significant untapped potential in their Internal Audit departments which could be used to add value to other business areas.
And so, you need to ditch the corporate policeman and leverage the experience and knowledge of Internal Audit to assist in solving the issues your organisations face.