Internal auditors were once thought of solely as the go-to people for all issues relating to financial controls and governance. But in the wake of the global financial crisis, internal auditors have become increasingly relied upon to identify operational risks and provide strategic insight on everything from mergers and acquisitions to IT system implementations.
“A lot of [boards] have begun to realize that internal audit can be very effective in helping them understand what goes on when they are not there,” said Richard Chambers, president and CEO of the Institute of Internal Auditors (IIA). “[And] … audit committees are looking to internal auditors to help avoid surprises. Internal auditors must monitor not only traditional risks, but also emerging risks—things that nobody might have on their radar. We have to understand the geopolitical and economic risks that our enterprises face.”
As the role expands, so too has the set of skills needed to do the job. An analytical mindset and critical thinking were the most sought-after skills for new internal auditors in all regions in the past year, according to IIA research, which found operational risk to be the top priority for shareholders and internal audit agendas.
Better communication and relationship-management skills are also in demand. Being able to get across the right message—and being able to effectively adapt the presentation of that message for different audiences—can be the difference between internal audit playing a largely reactive, assurance-based role or being a proactive business adviser. After all, every communication channel, whether it is with senior managers or audit committees, requires a different strategy.
“When you are with managers, you are in persuasive mode, communicating with them in order to persuade them to do something,” said Phil Tarling, vice president of the Internal Audit Centre of Excellence at telecom equipment-maker Huawei Technologies. “When you are with the audit committee, you are more in an explaining mode—what is happening, what has gone on, and how do we get to the end results.”
An important part of effective communication, regardless of the target, is being able to display an understanding of the business.
“For example,” the IIA’s Chambers said, “if I am going to try to build and sustain any relationship with the CIO, I’d better have some understanding of the IT environment, IT issues and challenges. I need to sit down and talk to him or her about things like cloud-computing risk. So you have to build credibility.”
A major role of an internal auditor is to conduct interviews for assessments. Too many auditors “seem to rely on a set of prepared questions and do very little digging into the responses they receive,” said Richard Fowler, a senior audit specialist at shipbuilder Huntington Ingalls Industries.
“Interviewing is a trainable skill, but other than those auditors who are also trained in fraud detection and investigation, there are few who receive training in interviewing techniques,” Fowler said.
Too few audit managers and directors within business think soft skills training is worth the expense, Fowler said, noting that he had to pay for his own lessons. The unfortunate irony of such a shortsighted approach to soft-skills training is that effective communications can drive efficiencies and save organizations money.
Carolyn Dittmeier, CPA, the chief audit executive of Italy’s postal service, Poste Italiane, has firsthand experience of how effective communication can help internal audit bring about positive change.
At Poste Italiane, she said, “internal audit pushed on certain areas of information technology, both in terms of efficiency and security, such as the fact that certain areas were manual and should be automated. And they pushed, and pushed, and pushed in the right way, and little by little they saw it change, and the IT area improved. That was the advisory part.
“And then the audit committee and senior management see change that wouldn’t have happened, or wouldn’t have happened as quickly, if it hadn’t been for internal audit,” added Dittmeier, who manages more than 400 auditors. “It’s this play between making sure things change by convincing in the right way that’s important.”
For a full version of this story, and for four key communication tips, please read “Internal Audit: The Importance of Being ‘Soft,’” by Arvind Hickman.
—Jack Hagel, editorial director
CGMA Magazine is published online at cgmamagazine.org in conjunction with the AICPA’s and CIMA’s designation, the Chartered Global Management Accountant. The magazine offers daily news and regular features focused on elevating and emphasizing management accounting issues.