So You Have an Audit Function, NOW WHAT!?

4 Destructive Practices that Derail the Audit Function!

Many organizations ranging from small to large, public to private are investing in internal auditing functions.  Some do it only because they are mandated by law, others because it is a good personnel development tool, and still others realize the benefits of having internal consultants.  Organizations can reap substantial benefits from an effectively utilized audit function.  However, an ineffective internal audit execution strategy can waste money and time and frustrate audit personnel.  The following 4 practices can significantly impact the success of an audit function.

1.  Personnel Approval with Substandard Pay
Oftentimes funds are allocated to start or sustain an audit function and so the Chief Audit Executive (CAE) begins the process of building the department.  Unfortunately, the CAE discovers that his/her salaries are not competitive with the current market.  Because of this, approved positions either go unfilled or experience high levels of turnover.  This leads to unnecessary instability in the audit function.

2.  No Seat at the Table
Not including auditors in key executive level activities (strategic planning, mergers, acquisitions, new initiatives, etc) hinders not only the audit function, but also the organization as a whole.  Auditors are experts in risks and controls.  They are the objective independent voice that will tell management what they need to hear versus what they want to hear.

3.  Punishment for Progression
Many audit functions are moving towards cutting edge technology such as data analytic tools and automated workpapers.  These tools allow auditors to perform more efficiently.  The more efficiently auditors perform, the more assurance coverage they can provide.  The more assurance coverage provided, the better the internal control structure.  Suppressing the audit functions ability to purchase and utilize progressive audit tools is extremely detrimental an organization.

4. Crippled Collaboration with Other Assurance Providers
Organizations have several assurance providers that perform complementing functions.  Coordination among audit, risk management, compliance, health/safety, etc increases the chances of a sound control environment.  Oftentimes, audit and compliance are viewed “outsiders”.  This view makes it difficult to collaborate.

There you have it.  Four ways that management can support an audit function without “supporting” an audit function.

Bonus – Substantial budgetary constraints.

Okay, we get it.  The audit function is not part of the primary product or service offering.  As such, there must be budget limits.  Striking the right balance of personnel, travel and training is difficult.  However, I find that many audit functions significantly lack the resources to effectively prosper.  Sometimes this can be done purposefully to “keep the auditors off our backs” instead of using the function as a collaborative partnership.  With that, there is a such thing as too many auditors.  There are some functions that suffer from this.  It is up to the Chief Audit Executive to find the right balance, communicate the need, and then hope for the best.

Have you been experienced any of these destruction practices?

Can you think of any more?

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Robert Berry (108)

Robert (That Audit Guy) Berry is a risk, compliance and auditing advocate, educator and innovator. He helps good professionals become better by creating articles, web services and training that allow them to expand their knowledge network.

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