The article, “ Jump-Start Success ” ( JofA , Feb.05, page 34), discussing the difficulties and challenges facing a new internal audit director, was right on the money. Having faced these challenges as a new director for a Fortune 50 company, I offer one caution and one strategy to consider as part of the need to “create value” noted in the article.
The most difficult audience to sell on the value-added benefit of internal audit is operating management. This audience takes great pride in the accomplishments of their departments and fears that auditors, who usually have limited experience in operations, will try to write up suggestions without a full appreciation for their operational feasibility. Ill-conceived recommendations put operating management on the defensive with their bosses. I would caution the new director to give operational audits a low priority in the start-up plan until the function is well established.
An effective strategy to build that early acceptance of internal audit is to promote internal audit as a profit center for the company. In other words, concentrate the early efforts on auditing third parties such as contractors, customers and taxing authorities. A well-designed program can recover enough hard-dollar savings to pay the entire operating expenses of the internal audit department. The result is that the less tangible savings in areas such as internal controls, financial reporting and compliance tests of company policies would then be free services.
Jimmie Wayne Knowles, CPA