Value of Internal Audit In An Organisation

21 September, 2018 / Blogs

Honestly speaking, we tend to hold very negative perceptions about the internal audit arm of any organization. In fact, it just might be the most unpopular department. Some say audit wastes the management’s time with incessant nagging in the name of compliance checks. Others fear that digging into their closets will uncover skeletons they would rather stay hidden. To sum it up, people’s attitude towards audit is captured in the following anecdote:

There is a pint glass; it contains half a pint of milk.
The optimistic manager says that the glass is half full.
The pessimistic manager says that the glass is half empty.
The internal auditor says that the milk is sour
.

Most people tend to believe that auditors will always see the bad no matter how positive a situation may be. They are basically seen as “witch hunters” so to speak. Yet, with the rapid-fire changes going on today in the business arena, every firm that wants to remain sustainable and achieve greatness has to invest in a well-run, proactive and independent internal audit department.

In any organization, each department has to be able to demonstrate its value in meeting the organization’s mission. However, with regard to internal audit, value can be difficult to define since it is a support and control function that is not directly linked to a firm’s goal. For this reason, there is more pressure on this arm to demonstrate its value more than any other activity.

While an operational or commercial activity is visible and can be more easily identified as delivering more value by price, quality or service, the value of internal audit is reflected by the improvement in internal control as well as reduction of risks to acceptable levels. You cannot measure the value of internal audit exclusively on direct results, but also on the indirect effects it has on the directors and management of a company. Internal audit has a relevant role in building and maintaining confidence in the organisation between the directors and management.

For an internal audit department to add value to an organisation, the department has to find ways to remain relevant and credible. It cannot perform the same old audits that have been done without expanding resources, time and effort in areas that are strategically important to the company’s overall success.

Technical skills are central to what auditors do and cannot be neglected. It is all well and good to have auditors in your team with certificates and degrees, but, if they do not have the people skills and emotional intelligence to perform well under pressure and diffuse difficult situations, then they are of little use.

With regular reports featuring corporate scandals and fraud, governance lapses, compromised ethics, and privacy invasion, most internal audit departments have embraced use of data analytics to help increase value in an organization. This helps them look for anomalies, red flags, outliers and indicators of fraud. Incorporation of this kind of technology into audit processes ensures that there is continuous monitoring and there are few slips.

Internal auditors are positioned to protect organizations against both traditional and emerging risks. They provide consultancy about how opportunities and vulnerabilities can be balanced and help in strengthening the corporate governance.

People often question whether an audit creates or solves problems. My answer is, maybe; it depends on the hat he or she is wearing. An auditor, being an independent party, has many roles. He or she can be an investigator looking for problems, an accuser if he or she finds a problem, a defender trying to find solutions, a juror deciding if an issue is problematic or not, and finally, a judge when deciding how to report a matter.

Above all, within all these different roles, every auditor wants to help solve your problems, and he or she cannot do this if you view them as the enemy. This is why it is always in the best interest of your organization to change your perception of the internal audit department from witch hunters to watchdogs. Internal auditors will fulfill their most fundamental role – supporting management and directors in achieving an organizational goal once they are accepted and acknowledged as a necessity for the wellbeing of the company.

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