Characteristics of a World-Class Internal Audit Department, Part I

A few weeks back, I was asked by one of my Audit Senior School attendees what are the key attributes of a world-class internal audit department. I have honestly not ever thought about this since, in my opinion, there are so many and they could be very different based on size, industry and geographic location. After some research and deep thought, here are the ten that I believe permeate through all of the differences previously outlined and are necessary for all world-class audit shops (WCAS):

  • Forward Thinkers – Many auditors only focus on compliance-related risks or only on the past. As Richard Chambers likes to say, auditors must be able to “audit at the speed of risk”. WCAS need to be able to audit strategy and assist the company in assessing future risks.
  • Communication – Auditors must be able to communicate at a high level and communicate transparently and continuously. This builds trust and creates more opportunities where we can assist the business in meeting its objectives.
  • Diverse staff skills/background – A few years back, I spoke at the GAM conference and had an in-session disagreement with an attendee that stated the best auditors are usually CPA’s. I might have agreed with this in my 20’s but as I have gotten more experience, I realize the need for as much diversity as possible in an internal audit shop. WCAS need CPA’s, industry personnel, people from the business, anything and everything that helps gives diverse perspectives to any audit.
  • Add “Value” to the Organization – I have always disliked the term “Value” because that term is subjective and beauty is in the eye of the beholder. WCAS define value through that view and understand what the clients and organization views as value. With that defined term, WCAS constantly strive to deliver this to their clients through their audits.
  • Understand the Objective of Internal Audit – Having a mission/vision statement is key; however WCAS always keep in mind the red book definition of internal audit:

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

It is imperative that WCAS remember we are assisting the organization in meeting its objectives. I ask my classes what the definition of internal auditing is routinely and I would estimate 90% do not remember this key phrase in the definition. If auditors do not remember this, trust me the business easily forgets this key point. This is something WCAS constantly stress through the audit process and this should help connect the audit client with a message they can buy into.

Those are five of our ten; next week we will introduce our next five attributes of a WCAS.

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