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Internal Audit – A (Re)Balancing Act

Internal Audit is about striking the right balance on many fronts. Here, I want to talk about some of the re-balancing acts that we, as Internal Auditors, are now expected to perform:

Balancing between Risks and Controls:

The foremost role of an Internal Auditor is to help the organization find the right balance between risks and controls. The controls should remain appropriate and propotionate with the risks that an organization faces. However, risks are not static, they are like a moving target and hence, the controls also need to be dynamic and agile to address the emerging risks. The risk landscape has significantly changed, and that means that there is an urgent need for re-balancing controls. As risk owners engage in reassessing their risks and review the controls to ensure that the residual risks are contained within acceptable levels, the Internal Auditor is well positioned to contribute valuable insights and support. In fact, the Internal Auditor should strive to develop an agile apparatus to address this ongoing need to re-balance.

How have you helped your organization reassess its risks and re-balance controls?

Balancing On-site Internal Audit with Remote Internal Audit:

Internal Audit, as we have known thus far, usually comprised of the audit team spending some on-site time – observing processes, interacting with the auditees and performing on-site testing; and some off-site time – analyzing data, performing data-testing and summarizing observations. The Covid19 situation has called for a significant re-balancing of the on-site and the off-site time spent on Internal Audit. Today, the Internal Auditors need to perform bulk of their audits remotely yet resourcefully, through changes in audit processes, application of audit tools, proactive team management and innovative client interactions.

How have you transitioned to remote Internal Audit? What were some of the most significant and difficult changes that you made during this transformation?

Balancing in-person meetings with on-line meetings and communication:

Internal Auditors typically interacted extensively with the stakeholders whose work/function/entity they were auditing. The interactions, mainly in-person,  took the form of process walkthrough, query discussions, audit review meetings, Audit Committee presentations and the like. With the outbreak of the pandemic, all in-person meetings have taken the form of on-line meetings, phone calls or email communications. The ease of walking over and resolving issues informally has gone – most discussions and meetings are recorded and hence, there is loss of some spontaneity. Often, one or more of the participants are distracted and the warmth of that cup of coffee is missing. Internal Auditors now need to gear up to keep the communication open and effective and keep their audiences engaged and responsive in this new environment. As Internal Auditors learn to re-balance between in-person meetings and on-line meetings, keeping the right balance in their communication has never been so challenging.

How have you maintained communication with key stakeholders and ensured the right balance between too little and too frequent interaction?

Balancing Classroom Training with Guided Learning Opportunities:

Most Internal Auditors started their IA stint with intense formal induction training, followed by hand-holding/mentoring by an experienced IA team member. For large IA teams, induction training provided an opportunity to get to know peers and seniors, the nuances of internal processes and the do’s and don’ts of the organization. Frequent trainings and sharing of experiences form the core of most IA teams, making the teams effective and agile. With off-sites and in-house physical training events cancelled for most of 2020, there is now a need to re-balance the team interactions with the right mix of on-line training, interactive sessions, informal open-houses and guided learning opportunities, all in the virtual space.

How have you re-balanced your team dynamics to ensure effective learning, along with opportunities for team bonding?

Balancing Cost/Resource Optimization with Talent Retention

This is the tough one – both, for the Internal Audit team and for the organization as a whole. It has taken a lot of efforts to build a credible and effective team. Now, with the slowing down of the economy and new ways of doing business, most organizations are finding it difficult to engage the full team effectively. Cost cutting, resource optimization and possibility of business closure is constantly being discussed. In this environment, how does one balance the objectives of optimization with talent retention? Are there ways to retain talent by re-directing their time and energy to more relevant areas? Many forward-looking CAEs (Chief Audit Executives) are retaining the team by retraining them in areas such as Data Analytics, Cyber Security and Automation; and at the same time, helping them develop attributes of resilience, emotional intelligence and empathy.

What are the initiatives required to make Internal Auditors future-ready? What is the re-balancing called for in skills and competencies for the IA team?

Balancing Assurance Activity with Consulting Opportunities

Internal Audit teams are engaged to deliver a set of assurances as also provide consulting support on various initiatives of the organization. Achieving an optimum balance between the assurance activity and the consulting opportunities is the cornerstone of an effective internal audit function. The chaos caused by Covid19 has demanded that significant effort of the IA team be directed towards value added activities, without losing sight of the critical assurances that the management expects and ensuring independence of Internal Audit at all times. Internal Auditors are increasingly finding themselves engaging in consulting activities ranging from participating in re-writing SOP’s for responding to COVID19 situations, reviewing ERM, facilitating digital transformation and more. The fabric of the assurance activity has also changed with a need to address urgently areas such as cyber security concerns, data privacy and confidentiality issues, confirming compliance with rapidly changing regulations and auditing re-negotiated contracts and altered supply chains.

How is your IA team re-balancing and prioritizing between various assurance demands and consulting opportunities?

We invite you to share your ideas and suggestions. Tell us how you are coping with some of these challenges? Let us collaborate and evolve together. Your comments will give life to this blog.

The Blog solely reflects the personal views and opinions of the author(s).