Dr. Rainer Lenz’s Post

Top 14 Challenges Internal Auditors Face Internal auditors play a vital role in maintaining the integrity and efficiency of organizations. However, their journey is often fraught with challenges. Here are the top 14 hurdles internal auditors commonly face 👇👇 1️⃣ Clarifying Their Role to the Audit Committee : Communicating the purpose and scope of internal audits to the audit committee is essential to ensure alignment and support. 2️⃣ Maintaining Independence : Independence is critical for providing unbiased assessments, even when facing pressure from senior executives. 3️⃣ Auditing Ethical Concerns Among Leadership : Addressing ethical issues within the board and senior management requires sensitivity and a strong ethical compass. 4️⃣ Securing Adequate Resources : Obtaining sufficient resources, including staff and budget, is crucial for conducting thorough and effective audits. 5️⃣ Building Trust and Collaboration with Auditees : Establishing and maintaining trust with auditees is key to gaining their cooperation and ensuring successful audits. 6️⃣ Operating in Weak Control Environments : Conducting audits in organizations with poor control environments/cultures necessitates additional effort to drive improvements. 7️⃣ Demonstrating the Value of Internal Audit : Continuously proving that internal audit activities add tangible value to the organization is vital for gaining and retaining support. 8️⃣ Ensuring High Quality and Continuous Improvement : Striving for excellence and consistently seeking ways to enhance the quality of audits is essential for staying relevant and effective. 9️⃣ Engaging Regularly with the Board/Audit Committee : Frequent interactions with the board/audit committee help align goals, share insights, and obtain necessary backing. 1️⃣0️⃣ Balancing Expertise with Mission Scope : Deciding when to take on or decline specialized audit missions requires careful consideration of available expertise and resources. 1️⃣1️⃣ Managing Work-Life Balance During Peak Periods : Securing time off during high-demand periods like December or March can be particularly challenging, impacting overall work-life balance. 1️⃣2️⃣ Navigating Rapid Regulatory Changes : Keeping up with fast-paced regulatory changes and ensuring compliance requires agility and continuous learning. 1️⃣3️⃣ Implementing Advanced Technologies : Embracing and integrating new technologies, such as AI and data analytics, into the audit process can be daunting but necessary for staying ahead. 1️⃣4️⃣ Implementing Audit Recommendations : Internal auditors often find it challenging to ensure their recommendations are effectively implemented by the organization. Internal auditors must navigate these challenges with strategic thinking and adaptability. ✒️ Share your experiences in the comments about the challenges you face in your role! 🔄 Please feel free to share this post with GRC community. #InternalAudit #iia #RiskManagement #GRC #InternalAuditor #GIAS

Amongst many other celebrations, May is also «Internal Audit Awareness Month», providing an opportunity to recognise and appreciate the essential contributions of internal auditors to organisations worldwide.   I came across an interesting blog written by Richard Chambers, former President and CEO of the “Institute of Internal Auditors ». In his blog, he emphasises the need for the profession to dispel five enduring misconceptions about the internal audit profession, encouraging stakeholders to contribute to enhancing understanding and perception.   Myth #1: Internal auditors are “bean counters” just like the accountants. Contrary to popular belief, internal auditors do not solely focus on financial records but also address fraud risks, compliance issues, and operational challenges. The profession now seeks diverse skills beyond traditional accounting backgrounds.   Myth #2: Auditors cannot succeed unless those they audit fail. Internal auditors are often misunderstood as solely aiming to find faults. In reality, their focus is on major risks rather than nitpicking details, aiming for substantial improvements rather than sensational findings.   Myth #3: It’s best not to tell the auditors anything unless they specifically ask. Contrary to the belief that it's best not to disclose information unless asked, transparency fosters efficiency in audits. Concealing information hinders the audit's purpose of adding value and improving organisational operations.   Myth #4: Internal auditors follow a cycle in selecting their audit “targets” and use standard checklists so they can audit the same things the same way each time. Internal audit planning is no longer based on rigid checklists but on risk-based assessments. The profession evolves dynamically to adapt to changing organisational risks.   Myth #5: Internal audit is the corporate “police function.” Internal auditors are watchdogs, not bloodhounds. Building rapport and coaching clients facilitate improvements rather than adopting an accusatory approach.   You can find Richard Chambers blog by clicking on the link below 👇.   Happy reading and Happy Internal Audit Month     https://lnkd.in/efdYkePS #InternalAuditMonth #InternalAudit #OrganisationalExcellence #RiskManagement #ThoughtLeadership #CorporateGovernance #TeamWork

𝗧𝗵𝗲 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗔𝘂𝗱𝗶𝘁𝗼𝗿 𝗪𝗵𝗼 𝗪𝗮𝘀 𝗕𝘂𝗿𝗻𝗲𝗱 𝗔𝘁 𝗧𝗵𝗲 𝗦𝘁𝗮𝗸𝗲 A Story About Challenging the Internal Audit Status Quo In the village of Salem, where questioning the status quo was akin to blasphemy, lived John, an Internal Auditor with dangerously innovative ideas. “Why not optimize our auditing methods?” he suggested one day, waving a meticulously crafted spreadsheet in the air. “Imagine the savings in candles alone!” The other auditors, clutching their ledgers and quills like sacred totems, recoiled in horror. “Optimize? But tradition dictates our every tick and cross!” they cried, scandalized. Undaunted, John proposed an audit of their auditing, a meta-review to end all reviews. “Efficiency could be our guiding light,” he declared, envisioning a future where audits didn’t drag on like eternal winters. But in Salem, efficiency was the real heresy. John found himself on trial, not before flames, but a tribunal of his peers, their gavels poised like executioner's axes. “Innovation in auditing? Unthinkable!” they declared. As John faced expulsion, his last words were, “You all talk of change, but none among you practice what you preach.” Salem remained steadfast in its ways, but whispers of John’s radical efficiency haunted the profession. The tale of the auditor who dared to audit the auditors became a cautionary fable, teaching future generations the perils and potentials of questioning tradition. 𝗧𝗮𝗹𝗸 𝗶𝘀 𝗖𝗵𝗲𝗮𝗽; 𝗔𝗰𝘁𝗶𝗼𝗻𝘀 𝗥𝗲𝘃𝗲𝗮𝗹 For all of the talk about ‘change’ and being more ‘bold’ or ‘finding new ways of doing things’, I’ve witnessed the opposite in the profession. Sure, an Internal Audit Manager or executive will pontificate and suggest that their team or office should be more bold or find new efficiencies. But the reality? As soon as one auditor, in the long line of internal auditors, steps forward and tries something new, the powers that be beat the auditor back with a stick. They tell the auditor that they “can’t do things that way”, that “it’s against auditing standards”, and that “it’s always be done another way”. They will unwittingly make an example out of them. All of the other auditors watching will know not to take any future chances or risks. 𝐌𝐨𝐫𝐚𝐥 𝐨𝐟 𝐭𝐡𝐞 𝐬𝐭𝐨𝐫𝐲? Be covert in your approach. When you start hacking processes; when you start implementing these strategies and become hyper effective and efficient, don’t let anyone know what you’re doing. Just let your results speak for themselves. Once you become manager, executive, and/or start your own firm, you can implement change. But until then, keep all of this to yourself. Remember what happened in Salem. If you enjoyed this, consider our newsletter: The Internal Audit Mastery Newsletter  https://lnkd.in/gUHre23x 

The Power of Internal Audit: Embracing Independence As a professional auditor, ensuring the independence of internal audit is crucial for maintaining integrity and credibility. Here's a detailed overview: Definition: Internal audit evaluates and improves risk management, internal controls, and governance processes. It provides stakeholders with independent and unbiased assurance that operations are running efficiently and effectively. Principles of Independence: Internal auditors must be free from influence or bias, avoiding conflicts of interest and maintaining confidentiality. This ensures that their work is objective and unbiased. Importance of Independence: Independence is crucial for internal audit because it allows auditors to identify and report on potential risks and weaknesses that may not be apparent to management. It also ensures that stakeholders have confidence in the audit process. Challenges: Maintaining independence can be challenging, especially in organizations where internal audit is closely tied to management. Common challenges include: - Conflicts of Interest: Auditors may face conflicts of interest when auditing departments or projects they have a personal interest in. - Lack of Resources: Internal audit may not have the necessary resources to perform their duties effectively, which can compromise independence. - Pressure from Management: Auditors may face pressure from management to tone down findings or recommendations, which can compromise independence. Strategies: To maintain independence, internal auditors can adopt the following strategies: - Establish Clear Policies and Procedures: Establish clear policies and procedures for internal audit to ensure everyone understands their roles and responsibilities. - Maintain Confidentiality: Maintain confidentiality when performing audits to ensure sensitive information is not disclosed. - Avoid Conflicts of Interest: Avoid conflicts of interest by recusing themselves from audits where they have a personal interest. - Seek External Guidance: Seek external guidance from professional bodies or regulatory agencies to ensure internal audit is in compliance with industry standards. Impact of Violating Independence: Violating independence can have serious consequences for internal audit. It can lead to a loss of credibility, a decline in effectiveness, and even legal and regulatory issues. Real-Life Case Studies: The Enron and WorldCom scandals highlight the importance of independence in internal audit. Both companies' internal audit functions were compromised by management, leading to a loss of credibility and a decline in reputation. Independence is crucial for internal audit. By adopting strategies to maintain independence and ensuring unbiased work, internal auditors can provide stakeholders with confidence in the audit process. Hashtags: #internalaudit #independens #auditor #tatakeelolaperusahaan

Dive into the details of the IIA's new global internal audit standards and discover how they can help enhance your organization's audit practices. Read more on our blog now! #IIA #Diligent #Audit #InternalAuditors #GRC

Internal Audit Reports- convention and intention: The convention is to have them, prepare them. And to have/prepare them as WRITTEN lists of 'complaints' & 'criticisms' & 'accusations' & 'shortcomings' / failures / 'misdeeds' of Management. The intention, in Internal Auditing theory, as captured in IIA Missions and Definitions, is to result in Value. Generally understood as being through positive/desirable - helpful, constructive, improving - reaction/action of/from Management. In the direction of fulfilling the statements capturing all what constitutes Value in the organisation. The convention is that the intention is realized through the formal WRITTEN Report. Prompted, caused, enabled or otherwise resulting from Management being made aware of the Report's contents; with all the effects that new awareness produced on their state of mind, entering the mechanism converting feelings & thoughts to intentions decisions & actions. The reality is that this last conventional presumption is utter rubbish. Directly and completely at odds with basic laws of Human Psychology. As directly and personally known, the very hard way, by each one of us human beings, be we Managers, Auditors or anything else. One of the most basic laws being: If you are looking for a way to BRING THE BEST OUT OF ME, for whatever it is I am supposed to be expected to do (which generally is called OBJECTIVES), serving me with a list of things I do badly and effectively telling me how to do less badly and asking/demanding I do is certainly not the best, and equally certainly far from the best, and equally certainly one of the worst, ways. The true operational/tactical intention, about fulfilling the ultimate strategic intention, is COMMUNICATION. Of the ways in which we Auditors objectively think from our independent perspective the way management manages their assigned Organizational Objectives - in particular the risk/uncertainty attaching to their success prospects - could be improved (so as to improve the prospects of success, at those Objectives). This COMMUNICATION is most certainly more constructively/productively effected in less formal, soulless, harsh, abrupt, arrogant, mechanical, cold, 'final', 'irreversible', committal ways than a written report being placed at the Manager's table; even if it was the result or culmination of a prior informal oral communicational process. The more I think about Written Reports, the less I believe that in net, overall, all-inclusive (COST-BENEFIT) TERMS, they HELP. Improve the prospects of success. At the organizational objectives. Through improving the objective-achieving efforts of the principal objective achievers, Management. Who, as human beings, work better when motivated/stimulated better. Hardly done by a written report dumped unceremoniously on their desk. Telling them you are failing and we can succeed where you are failing; we know better than you; we like to let everybody know we know better; and we hereby so do!

The lack of recognition for internal auditors as a valuable team stems partly from the internal auditors themselves. As the profession matures, it is crucial to acknowledge the need for progress in changing the perception. The ability to raise its competency by embracing the constant changes in the ever-changing business environment and the advancement of technology is much more vital now. Besides, some organisations are setting up the internal audit function merely to meet the corporate governance or regulatory requirements and very often the focus would be someone with finance/accountancy background (as we can still see this in the job) and with limited budget to support the function, which underscores the profession's ongoing development as well as raising the bar on what internal audit could really delivers. While I have been doing risk and compliance in the past eight years (after living and breathing as an internal auditor for about 15 years), I continue to interact with my peers (as well as my former team members). and noted that there is still a long way to go for this profession. The "substance" of internal audit vs the "form" would be critical to ensure the success of the profession. Also, with the implementation of the Global Internal Audit Standard, it may not necessarily elevate or promote the profession to be better recognised or appreciated, without having the stakeholders really understand why we need internal auditors in an organisation (even for the internal auditors themselves)! #JustAThought #InternalAudit #InternalAuditor #IA #InternalAuditProfessions

The Institute of Internal Auditors Inc. (IIA) has just released the new 2024 Global Internal Audit Standards. These Standards guide the worldwide professional practice of internal auditing, are principle-based, and serve as a basis for evaluating and elevating the quality of the internal audit function. The new standards have strongly positioned the Internal Audit profession for relevance into the future, redefined the value through a deliberate purpose statement and outlayed the significant role of the Board in guarding the internal audit effectiveness, independence and outcomes and consolidated leading practices and well researched guidance on managing IA functions and performing internal audit services. The new standards provide a robust framework to achieve a dynamic, relevant and value based profession in a volatile global risk environment. Access the new Global Internal Audit Standards here: https://lnkd.in/dR63qUPF #IIA #InternalAudit #Auditing #AuditNews

Our last post covered the 5C's of audit. This post takes a closer look at the side of an internal auditor and the role the play for an organization. Internal auditor serve many purposes but as for the board/management they play a critical role in answering 3 primary questions. 1. Are we failing, struggling, or thriving in compliance goals? 2. Are the choices we're making as an organization managing risk properly? 3. Can we improve on our processes to make the workflow more efficient and effective? The responsibilities of an internal auditor change considerably depending on thr size of the company, types of organization, skill level, and managerial needs. No matter the need, an internal auditor fulfill 3 responsibilities to the company. 1. Most importantly they monitor, analyze, and assess risk and controls for an organization. 2. Review the organization for compliance governed by state and/or federal policies and laws. 3. Reassuring and/or make recommindation to the board or managerial staff to better stay in compliance. To do so they may use data or observations to ensure they make recomindation or confirm that compliance is being followed. This can be for both policies within the company or even reporting requirements. To recap, an internal auditor is reposonsible for educating staff and management so they can improve business operations and make workflow more efficient. They act as a consultant on how to best manage a companies risk and goals. Finally, they report to only those who work for the organization. Stay tuned for the next post to better help understand what an external auditor does for an organization.