Past competencies are no guarantee for the future

Fulfilling an internal audit issue is customized every time. Nevertheless, a number of clear developments can be detected in these diverse client requests. In this article, we outline some observations from our practice at AuditPeople that relate to characteristics and competencies required of the internal auditor.

FIFA as an interesting case study

We always enjoy reading the blogs of Richard Chambers, president and CEO of our global professional association. Last June, in his blog, he referenced the perils of the world football organization and the lessons for the internal auditor. The five lessons are included below, in free translation.

The FIFA Scandal: five lessons for Internal Audit

• Analyze the culture within the organization and sound the alarm if it encourages corruption.
• Identify potential reputational risks in a timely manner and quickly bring them to the attention of responsible management.
• Take a role where you provide insight into the quality of crisis management. Not after the fact, but during the crisis. Or rather before a crisis manifests itself.
• Stay abreast of the latest changes in anti-corruption legislation.
• Display the courage to say what is necessary to say, regardless of the consequences.

Richard Chambers, June 1, 2015

The five lessons mentioned clearly appeal to a number of important competencies for internal auditors: alertness, incisiveness and proactivity. The auditor is also expected to understand the culture of the organization, recognize the importance of soft controls and be able to examine them. Finally, there is a call for courage.

Fortunately, our clients are not in the same turbulent waters as FIFA. Nevertheless, in the five lessons mentioned, there are clear parallels to what our clients find important for a good internal auditor. We will elaborate on some of these below.

Auditors with different backgrounds

Internal audit departments in recent years have clearly become more open to study backgrounds other than the traditional financial-economic ones. Studies such as psychology, communication sciences, law, public administration and business administration are seen as an interesting addition to the - sometimes already frequently present - auditors with a business economics or accountancy background. A client requests this for a variety of reasons:

• There is a growing belief that a multi-aspect view can add more value to the business.
• New topics such as culture, leadership and ethics are appearing on the audit calendar. Originating from our own risk assessments, or from urgent requests from a regulator that attaches increasing importance to such topics.
• Applied reference frameworks such as COSO are increasingly demanding attention to the socio-organizational side of control, which means that the same audit object as before is suddenly approached in a (partially) different way.
• Scarcity of audit staff "forces" the Head of Audit to think beyond his traditionally desired profile.

Of course, auditors with a financial economics background also remain much needed. The broadening of the Internal Audit profession makes it noticeably more interesting for Big Four candidates; especially for those who have always liked interim audits. For them, internal audit not only offers a broad field of work. They also grab other additional benefits as an internal auditor: a better work/life balance than with the Big Four and the continued involvement with one organization where they can make visible contributions to the realization of organizational goals.

From methodologies to methodology

Whereas years earlier the audit calendar was mainly cyclical in nature and had a standard duration of 3-5 years, today it moves more with faster changing and different types of risks. And by this we certainly don't just mean the socio-organizational topics mentioned above. Projects, chains, cross-departmental and cross-process themes and strategic (change) processes are examples of new audit objects. These are relevant but at the same time challenging issues for which existing work programs are often no longer sufficient. The auditor must increasingly think beyond the process and have methodological knowledge to operationalize the constantly changing (customized) questions into a concrete standard and approach.

Very specific object knowledge

However, internal audit is not just about audit knowledge. Object knowledge also needs to be secured in the audit team and also seems to be becoming increasingly important. After all, one of the causes of the recent credit crisis was that hardly anyone really knew how to fathom financial products anymore. At AuditPeople, we especially notice that the number of requests for interim deployment of audit specialists with very specific knowledge is strongly increasing. The variation in the object knowledge requested is quite large, from technical IT knowledge to knowledge of real estate or very specific laws and regulations like Solvency.

An attitude shift

The same Richard Chambers drew attention in the past to a possible threat "that Internal Audit may become too much of an external party within the organization." In line with this, we saw that in recent years many audit departments have set themselves the goal of becoming a better business partner of line management. This was fulfilled in many ways. In relation to the competencies of the auditor, it meant a clear attitude shift. An attitude that leads to "Connect", "Together" and "We instead of I" seems to be the new desired audit attitude. The development of Appreciated Auditing that a number of audit departments are picking up on also requires the auditor to move away from the judgmental attitude focusing exclusively on "the wrong thing. In appreciative auditing, there is (in short) more attention to what is going well (and should be retained). Hans Nieuwlands (Director IIA Netherlands) also recently indicated - in an inspiring conversation with the IIA Young Professionals - that the auditor primarily serves the common corporate interest (of course while maintaining independence and objectivity). The competencies he mentioned "Really listening" and "Clearly conveying your message" clearly contribute to this.

Portion of guts required!

Finally, it appears that in recent years our clients have regularly asked for auditors 'with a good portion of guts'. This was also evident at the most recent IIA conference, where, remarkably enough, several people called for auditors to show guts. First of all, Pieter Couwenbergh, FD journalist, asked those present to take an example from Thijs Smit, who showed his straight back during 'moments of truth' within various organizations. IIA Global Chairman Anton van Wyk even spontaneously added a fifth C of Courage to his Four-C concept. The interpretation of the broad concept of Courage obviously differs among our clients. When we ask further questions, it turns out that they mainly want to see back:

• An auditor who has the courage to say what he sees (regardless of the consequences, as Chambers also pointed out).
• An auditor who also dares to appeal to his intuition, in addition to all sound foundations.
• A communicatively strong auditor, daring to move more into the organization (away from his own desk).
• A head of audit who dares to put the really relevant audit objects on the calendar.
• A head of audit who enjoys and vigorously manages the very challenging playing field of all parties around him (BoD, Audit Committee, external auditor, supervisor, other internal GRC functions).

Not resting on laurels

Our practical experiences show that there are clear developments in competency. Some of these developments are not necessarily new, but are required more explicitly. This is logical, given all the developments in the auditor's environment. The field of internal auditing is changing more than we might think. That said, our view is that the most competent auditor looks at himself in the mirror from time to time and asks himself which competencies deserve attention. In short, an internal auditor cannot rest on his laurels: past competencies do not prove to be a guarantee of a successful future.

This article was featured in AuditMagazine 3 of 2016, published Sept. 22, 2016. Marc van Heese and Sander van Oosten are managing partners of AuditPeople.

AuditPeople (www.auditpeople.nl) ears many an audit function of capacity and expertise, on a temporary or permanent basis.