A new focus for Audit International and our clients is ESG. But there is one thing all of us are perhaps not considering as much : ESG’s impact on the workplace.

Environmental, Social, and Governance (ESG) factors are changing how companies conduct business in many ways, including:

– New ESG or climate-related disclosure regulations to comply with, especially in Europe.
– The need to effectively identify and manage ESG risks (including compliance, financial, and reputational risks), and integrate them within the existing enterprise risk management framework.
– Bringing a host of environmental and social metrics at par with financial information, especially with regards to data quality. There is a growing need for investor-grade ESG data.
– Ensuring that ESG factors give you a competitive edge in attracting investors, customers, and talent.

But there’s another change brought by ESG that’s not getting enough attention: The effects on workplace interactions.

– Firms that ‘get ESG right’ understand that ESG isn’t the responsibility of only one person. You can’t simply appoint a Vice-President or Director of ESG, or just place ESG under the Chief Financial Officer or Chief Sustainability Officer.

– Also, different departments can no longer work in their own little world with occasional collaborative efforts across functions. The important changes brought by ESG will also bring fundamental changes to the workplace.

The ESG team :
ESG is a team sport. People from different departments will have to work together as part of a single team.

You may be in Finance, Legal, Risk, HR, EHS, Sustainability, Operations, IT, or Procurement, but now, in addition to your regular teams and colleagues, you will also be part of the ESG team.

And your company’s ESG team will play a critical role because strong ESG performance drives corporate performance.

This represents a significant shift because suddenly key employees will have to align with a new set of stakeholders. They will have to work together with colleagues they might not have worked with before, or even knew. Here’s a sample of the types of interactions to expect:

EHS will have to provide key metrics to Finance for combined financial and ESG (or non-financial) reports.
EHS will also have to show to Finance and auditors (internal or external) how they provide limited or reasonable assurance on the data.
Procurement will seek guidance from EHS and the Sustainability team on how to capture greenhouse gas emissions data to calculate Scope 3 emissions.
HR will be asked to provide more tangible metrics on DEIB to Finance for inclusion in the combined financial/ESG report.
Did you bring together key stakeholders across departments as part of your ESG strategy?

Have you recruited members of your ESG team yet? If this is a topic you are actively hiring for, then please get in touch with us here at Audit International to assist you with any hiring needs you may have.

Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

With one in five people pledging to pursue career goals and ambitions in their New Year Resolutions, Audit International have researched career experts advice on achieving these in 2023.

New Year, new (career) you! More than 20% of people toasted the start of 2023 with some form of New Year’s resolution and one in five of those pledged to pursue new career goals.
But with January now over, many of those good intentions may have already fallen by the wayside. If that sounds familiar, you’re not alone. In fact, people will typically ditch their ‘New Year New Me’ resolutions by the second week in January.

If that strikes a chord, don’t despair. Audit International has taken some insights from careers experts on their top tips on getting your career back on track.

Re-evaluate your current career choices :
For those with an established job, or who have taken time out of work to start and raise a family, it can be daunting to consider a new industry or completely change career path. However, it’s never too late to take your role in a different direction or re-enter education.

“If you’re looking to change careers in 2023, it’s important to evaluate your previous experience up until now. Consider which parts of your current or past job roles have brought you the most satisfaction or fulfilment, as this can help guide your new career path,”.

Adopt a continuous learning mindset :
Passing all of your exams is an amazing achievement, but that’s when the real learning starts. “Don’t assume you know everything now. Listen and ask questions and make notes and look things up. Every day is a school day!”

Work on your soft skills :
To get ahead in your career it’s also important that you develop soft skills that complement your technical prowess. “As part of your role, you will be expected to provide advice to clients and companies on any number of specific issues they may be experiencing, so developing strong soft skills including clear and concise communication, empathy, and the ability to make decisions to help resolve conflict will be key to your continued success.”

Develop a killer network:
Natural networking is everything. LinkedIn bombing everyone you think might be useful to you is annoying and will rarely achieve anything. Show an interest in everyone you meet and connect in a more genuine way. Try not to just focus on people you think are ‘important’.

Be authentic :
As an accountant, you are well-organised, a skilled number-cruncher and have a keen eye for detail. But as your career progresses and you become a team leader, you will need to focus more on management and people skills. If you get promoted to a management role without any formal training, it can be easy to act like the type of manager you’ve seen in the past. “People buy people, so be yourself, not the manager you think you should be”.

Focus on developing relationships :
Accountancy is a task-oriented job and it’s easy to get lost in the daily grind of completing tasks and hitting deadlines. But the real value you add as a manager is building relationships with staff and being an enabler and facilitator for the team. That means getting to know your colleagues on a personal level and understanding their strengths and capabilities.

Keep your eyes open for growth opportunities :
Don’t get bogged down in short-term deadlines and tasks. “These need to be done for sure, but you should also look more widely to find new areas of growth and challenges that can help you advance in your career”. That could mean studying for a qualification, taking on new responsibilities, or joining a cross-functional team. “Always look for ways to build your skills and contacts and your career will progress nicely.”

Don’t limit yourself to one area :
One of the best ways to elevate your career is by making sure you don’t limit yourself to just one part of the accountancy industry. “Gaining experience in a variety of roles – especially during the first few years of your career, as you decide the areas in which you thrive and most enjoy – will build your confidence and will provide you with essential skills that help boost your long-term career prospects”.

Connect with a mentor :
Regardless of where you are in your accountancy career, having the advice of someone more experienced than you can be invaluable. If you are unable to secure a mentor through work, it is also worth approaching people that you work with who could help you, or you could even look at joining an association that could pair you with someone.

Don’t put too much pressure on yourself :
It’s always good to be ambitious when it comes to your career and education, but avoid putting too much pressure on yourself when it comes to achieving all of your goals or training courses by the end of 2023. “Comparing yourself to others or putting pressure on yourself can lead to you feeling overwhelmed or burnt out. Take as much time as you need and find flexible options that work for you, especially if there are other important childcare or work commitments to take into consideration.”

Be ready to flex. Having a long-term career plan is great. However, things change and you will get frustrated if you can’t adapt or sometimes go with the flow.

Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

Let’s face it. Even here at Audit International, we understand Internal audit still suffers from some rather negative stereotypes. There are plenty of companies or units where internal auditors are not welcomed with open arms. Audit clients may view internal audit with suspicion, expecting a “gotcha” mentality or may feel like they are under surveillance.

Sure, it’s often undeserved and some of it comes with the territory, but we may even be perpetuating such negative views with the words we use. Words and phrases that internal auditors consider just a normal part of the profession’s vocabulary may actually be words that trigger negative reactions in our audit clients. And often, internal auditors don’t realize they are contributing to the hostility by using them.

Words matter and good internal auditors choose them carefully. But auditors are also as prone to using professional jargon as anyone. These are words that have become so commonplace that we might not think too much about what they really mean, especially to others. We all use them. Yet, how they might be interpreted may not be how we intended. So, what can we do about it?

Here are seven words that we should consider their meanings more closely and either use them more carefully or strike them from our vocabulary completely.

1. “Finding”
Most internal auditors call what we consider reportable (in writing and verbally) a “finding.” Think about that for a moment, though. It’s not as if the vast majority of our audit observations were hiding or lurking in some hard-to-discover, dark and foreboding place, and it took our best Indiana Jones skills to unearth them. Lo and behold, ah ha! We have a “finding.” The word relates a context of sleuthing and uncovering things that were hidden, perhaps intentionally.

So put yourself in the shoes of your audit clients. We come along and have all these “findings,” as if they weren’t doing their jobs and it took us to find these gems of reportable conditions. Worse yet, we are often reporting as “findings” what audit clients told us directly. How would you feel if someone walked through your house and told you at the end of their visit that they found the carpets needed vacuuming, the furniture needed to be dusted, and relayed a few other of their insufficient housekeeping “findings.” You’d likely be inclined to never invite them back.

Try using the words “observations,” “conclusions,” or “conditions,” rather than “findings.” You may find they work better in your organization. Audit clients will feel less like they are being accused of hiding information or that they didn’t see something that the auditors later uncovered.

2. “Weakness”
When we observe an issue, we also sometimes couch that issue by using another troubling word, “weakness.” We may not be able to avoid calling breakdowns in internal controls, as they relate to SOX-like work, “control weaknesses” if the controls are not working as they should (or at all). But we should avoid calling observations outside of controls “weaknesses,” if possible.

Think about it. You go into the manager’s office during an audit, and you say, “excuse me, if you have a few minutes I’d like to go over a few weaknesses that have come to our attention during our review of your area.” Expect immediate defensiveness. We might as well be criticizing their first-born by pointing out weaknesses in how the child looks or plays with others. The word connotes physical ineptitude and can strike a visceral blow to any manager’s ego.

Like weaknesses, “deficiencies” isn’t any better for all the same reasons. So, perhaps, try “opportunities,” or “matters for attention,” rather than “weaknesses.” Even “challenges” or “difficulties” will garner a better response from audit clients.

3. “Material”
While the term “material” has been part of auditing language forever and, although tough to really quantify, is an important and meaningful word. I mean, if it’s not material why look at it or consider it at all? We also have the SOX-related nomenclature of “material weaknesses” (which people want to avoid as best as possible). Look, if you tell someone something is “material” and it truly is agreed that it is “material,” that’s a big deal.

Yet when we tell someone who is the owner of something that we want to talk with them about a matter that is “material,” what would be the natural reaction of the person on the receiving end of that word? Disbelief, denial, and outright defensiveness are natural human reactions when told something is “material,” in a bad way, which affects them or their responsibilities. Think about being in the doctor’s office because you have not been feeling well. After a bit of consultation and tests, the doctor comes in the room and tells you that there is something “material” to discuss. You are likely to act with disbelief, denial, and defensiveness, naturally. The word conveys an urgency we might not intend. Do we really want our clients to react that way, now or in the future?

Note that “material” has an important legal context. The Securities and Exchange Commission defines “materiality” as anything a reasonable investor would deem relevant to their decisions about whether and how to invest. While it’s important to use this word carefully in this legal context, it’s also easy to adopt the word and use it outside this context, which can result in misusing it. Another problem with “material” is that it implies that everything else isn’t important or that other aspects of an audit client’s work are meaningless, which is not a great sentiment to convey.

So, perhaps, when you don’t really have to use the word “material” (or “significant” for that matter) in consultation or in writing, maybe consider some different language. Hey, there’s something important I want to run by you when you have a moment, and maybe we can write about the top matters for attention without calling them “material” (unless, of course, we must).

4. “Disclosed” or “Uncovered”

Like the word “finding,” the word “disclosed” (or the word “uncovered’) has a similar connotation. It’s as if the issue was hiding and no one knew about it or would ever find it without you, and your brilliance—the internal audit superhero with x-ray vision. OK, sometimes things were truly hidden, unintentionally or, worse yet, purposefully, and we did use our internal audit superpowers to uncover it and then we get to puff our chest and—cue music here—disclose it. But, come on, that’s rare.

Yet, we use the terminology all the time. For example, resulting from of our testing, it was disclosed that blah, blah, blah. Or, based on our review of the area, it was uncovered that yada, yada, yada. Now, if you’ve got sneaky and underhanded clients, who are going around hiding stuff from you that you truly uncovered and want to disclose to the world, then fine. But most clients don’t do that, and you want to collaborate with them in the future.

Imagine how you’d feel if the external team you hired to do your Quality Assurance Review (QAR) started telling everyone, verbally and in writing, what their work (and only their work) disclosed and uncovered in your internal audit department? How would you react to that? “Disclosed” implies that something was formerly a secret and now you are airing the dirty laundry out for the world to see.

So, maybe we need to back off the “disclosed” and “uncovered” language, at least a bit. Options might include, “along with management, we identified …,” “taking full stock of the evidence, it can be concluded that …,” “testing demonstrated that …,” or similar language. Just don’t use “revealed” instead. That’s just as bad.

5. “Entrance” and “Exit”
OK, you may need to bear with me a bit on this one.

We’re going to start an audit project, and our first meeting with the client is called, in many companies, an “entrance meeting.” Then, when we’ve concluded all our fieldwork, what do we call the last meeting with the client to wrap things up and ride off into the sunset to work on the audit report for weeks on end? The “exit meeting.” They are decent terms, descriptive of exactly what they are … our entrance (ugh, the auditors are here) and our exit (yes, they are leaving, let’s party).

Let me ask you this, though. Is this audit, the one you are doing an entrance into and an exit from, the first and last time you will ever see these folks? I sure hope you have an ongoing relationship and are interacting all year long, or at least on occasion. If that’s the case, there is no entrance and there is no exit because, like the song Hotel California, you may never leave. And, if you’ve done your relationship management right, they are happy about that.

The point is that “entrance” and “exit” are old-school terms from when we did things on a cyclical basis and may or may not come back. Back then, relationship-building was less important and audits had a fixed beginning and end. So, maybe we need to stop calling them “entrance meetings” and “exit meetings,” and just call them something else that isn’t so clinical and auditor sounding. Schedule your Project Introduction Meeting at the beginning and, maybe, your Project Wrap-Up Session at the end, or something like that. And, if you are well down the path of an agile implementation, all that entrance and exit stuff becomes moot anyway.

6. “Consulting”
Back in 1999, the Institute of Internal Auditors introduced the well-accepted and globally codified definition of Internal Auditing as: “An independent, objective assurance and consulting [emphasis added] activity designed to add value…” Back then, the word “consulting” was viewed positively. And, for internal audit to be positioned to not only provide assurance, but to also be viewed as a consultant? Well, to borrow a ’90s term, that would be “da bomb!”

But, somewhere along the way, the word “consulting” came to be viewed less positively, and we’ve started to insert the word advising to soften the term. Should we blame consultants for tarnishing a good word, and making people view consultants and, in turn, consulting, negatively? Perhaps, but that’s not the point.

We all want to be advisors, and the gold standard, the place to be, the coolest accolade, would be to be trusted and be an advisor. So, in our pursuit of being that vaulted trusted advisor, let’s drop the word consulting from our vocabulary, once and for all. Look, your clients might want to “consult” with you, but hopefully you are “advising” them.

7. “Satisfactory”
Often, we as auditors don’t want to overcommit, and use words that might get us into trouble later if something is determined to be different than our work concluded. There is just so much we can evaluate and then we must draw a conclusion and move on. So, we settle on words like “satisfactory,” even if things are notably better than the word implies. From an internal audit perspective, we are hedging out bets. We don’t want to be overly flowery with praise, and just conclude something is either “satisfactory,” “needs improvement,” or “unsatisfactory.”

Put yourself on the other side of the table. Let’s say, for instance, you’ve worked hard at something, gone the extra mile, and made sure it was done exceptionally well. Then, someone comes in, looks it over, and decides that things seem “satisfactory.” Ouch, gut punch! You put in a ton of effort, expected to get an “A” grade, and the professor gives you a “C.” That’s kind of deflating.

Let’s not forget that the word “satisfactory” means acceptable or good enough, but not outstanding or great. Yes, there are reasons to fall on the crutch of concluding, placing our highest auditor grade on something, that it is “satisfactory.” But, perhaps, if we can avoid it, we take the risk, rely on our work, and conclude that something better than a measly “satisfactory.” Don’t be afraid to say if something is exceptional, great, works well, or exceeds the requirement.

The Last Word
There is a lengthy list of good reasons, justifications, and rationalizations for why we use the words we do as internal auditors. Many of them have stood the test of time. Many are in use, and still exist, because we are hearing the world through our own ears, and not our clients’.

If we stop for a minute, and consider what these words sound like and what they actually mean, and the impressions they may leave on the ears of our clients who hear them, perhaps they are not the best words to use. Perceptions are reality, and if you want to change perceptions, maybe one way to do that is to change our vocabulary. In other words, say what you mean and mean what you say.

Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

With businesses facing the strongest economic headwinds in years, the Chartered Institute of Internal Auditors is urging internal auditors to embrace data analytics to navigate more risky, uncertain, and volatile times ahead.

To support their call to action the Chartered IIA, a professional organization for internal auditors in the U.K. and Ireland, in partnership with AuditBoard has published a new report “Embracing data analytics: Ensuring internal audit’s relevance in a data-led world.” The report is aimed at encouraging internal auditors to fully embrace data analytics in the age of systemic risk.

The aftermath of the pandemic, the war in Ukraine and now a recession has all magnified and exacerbated a multitude of business-critical risks. These major risk events are having compounding downstream effects on supply chains, inflation, growth, costs, Forex rates, cybersecurity, and workplace mental health. Creating an adverse business risk environment of a kind not seen for decades. Making it challenging for boards to keep pace with the myriad of risks they now face.

“Data is key for organizations to navigate more risky times ahead and it is key for the future of internal audit. Understanding what the data shows about risk resilience in today’s complex environment will help ensure organizations’ success. We urge businesses and internal audit to embrace data analytics,” says John Wood, Chief Executive of the Chartered Institute of Internal Auditors.

However, in these challenging times harnessing and embracing the power of data analytics can enable internal audit to deliver faster and more incisive insights on fast moving risks, that boards can then act upon swiftly. Helping organizations to quickly identify, manage, and mitigate emerging risks during rapidly evolving situations.

Needs Improvement
The report is based on a survey of 298 internal audit executives from the private, public, and third sectors across the UK and Ireland. The survey revealed:

60% of internal audit functions are already using some for of data analytics, an additional 7% having advanced to AI. However, this still leaves a third yet to adopt data analytics.
The top three risk areas for using data analytics are financial (62%), fraud (17%), and legal and compliance (6%).
The top three benefits of using data analytics include greater level of assurance (48%), 100% audit coverage (21%) and enhanced efficiency (14%).
The top three barriers to fully embracing data analytics include lack of skills (49%), lack of resources (24%) and lack of time to implement (12%).
Only 17% expressed concern that internal auditors could be replaced by robots in the future. Instead, data analytics and AI can free up internal auditors’ time to focus on strategic and systemic risks that could be coming down the track.

The report makes several recommendations for boards and internal audit, including:

– Boards and internal audit should ensure that senior management has defined the organization’s top five risks, and that the data support this view and is correct and reliable.
– Boards and internal audit should ensure that the organization has its own data strategy in place.
– Boards should work with internal audit to identify what data is available to improve risk assurance, and how data analytics could be applied to this data to improve assurance coverage across the organization.

– Boards and internal audit should work together to champion a data analytics culture and promote a data-first mindset.
“Given the warp speed at which risks can emerge and wreak havoc, embracing data-analytics is non-negotiable for boards and internal audit if they are to stay on top of the multitude of risks that organizations are now wrestling,” says Richard Chambers, Senior Internal Audit Advisor of AuditBoard, and former President of the Global IIA. “Data analytics enables faster and higher quality assurance for boards to then act on. In stormy economic times a data-led approach has never been more urgent.”

Audit International are specialists in the recruitment of Auditors and various Corporate Governance Professionals including Internal Audit, Cyber Security, Compliance, IT Audit, Data Analytics etc across Europe and the US.

If you would like to reach out to discuss your current requirements, please feel free to reach us via any of the following:
Calling
– Switzerland 0041 4350 830 59 or
– US 001 917 508 5615
E-mail:
– info@audit-international.com”

Audit International recommend five ‘Under the Radar’ Areas to Audit that May Not Be on the Audit Plan.

As internal auditors, we all have a “spidey sense” of what we should be auditing.

Sure, we should, of course, conduct comprehensive risk assessments that drive our audit plan, and many of the usual suspects will end up on that plan: cybersecurity, regulatory compliance, financial reporting, third-party relationships, and you know the rest.

But there are things, we would strongly profess, that should be audited, even if we aren’t formally auditing them and they never make it to the actual audit plan. Just by being aware—casting that web, if you will—you should constantly informally “audit” a few critical areas.

What might be some of those things we should (lower case) audit, even if we aren’t (upper case) Auditing them? Here’s Audit Internationals take on five:

1
Culture: Are Disconnects, Even if Subtle, Surfacing?

So much has been written and said about doing culture audits and internal audit’s potential role in doing such a review. Perhaps, however, your organization doesn’t support internal audit doing a full-blown culture audit. Does that mean you throw your hands up and do nothing with the topic? Heck, no!

Look, we are among the very few in the organization who have the benefit of both grasping the desired culture and viewing the entire company because of our day-to-day work. So, why not leverage that and tune into what is going on around us and notice the organizational behaviors, actions, and attitudes that are consistent with, as well as (importantly) counter to, the desired culture.

So, what’s an internal auditor to do?

Some caveats, though. First, be sure you completely understand the desired culture, both what is formally stated through things like the organization’s listed core values as well as what is implied in the “how things are done around here” subtleties. The formal and the informal culture are equally important. Then, as you go about your work in various departments and interact with people at all levels of the organization, be cognizant of behaviors, language, demeanor, protocols, and other elements that seem inconsistent with what you expected.

Now, if you witness such imbalances, and you’ll know because it will make you a bit uncomfortable, talk with close colleagues or discuss it amongst your team. If something seems amiss, continue to keep your eyes and ears open and provide your internal audit function leadership with examples of what you are witnessing. If there are culture issues in a particular area of your organization, it is likely manifesting itself in a number of other issues as well. Your internal audit function leadership will guide you on what to do and may provide guidance on the next course of action. Chief audit executives will need to consider when and how to elevate such delicate issues. Yes, it’s a sensitive topic, but something that might be critical to address. Your spidey sense will guide the way.

2
Employee Engagement: Are People Checking Out?

While it has been a topic in the corporate world for more than 20 years, at least since the Gallup Organization and their Q12 employee survey instrument brought it into the lexicon, “employee engagement” has re-emerged these days. By now, we’ve all heard the new buzz phrase “quiet quitting.” While it’s a catchy label that has been slapped on what is, in essence, just disengagement, it’s not to be taken lightly. Employees who have become disengaged in your company’s mission, vision, and values don’t have passion to do their best. This should be deeply problematic to executive leaders and, in turn, to you. It is a significant and costly drain on everything your organization does.

So, what’s an internal auditor to do?

Just like with the culture topic, we, as internal auditors, interact with more of the organization across all levels (along with HR) than most anyone else in the entire organization. Therefore, we have our finger on the pulse when it comes to engagement and its evil twin, disengagement. Do we have a general sense though the course of our internal audit work that people care or if they are they just going through the motions? Sure, we do.

We don’t need to be scientific about it, and we don’t have to call anyone or any function, department, or location out, per se, but if we see that there is a trend developing toward greater levels of disengagement, let it be known. Make it a part of what we absorb about the organization on a daily, weekly, and monthly basis. Elevate the concerns, whether to HR, department levels, or even the senior management. In other words, don’t ignore it.

3
The Physical Facilities: Are Things in Disrepair?

As much as we may not all be going into a physical office as much anymore, many employees will still spend at least some time in the office or at company facilities. And, the physical state of the office location, branch, facility, or building space is important. Not only can facility disrepair be unhealthy or unsafe, but it can also just negatively affect employee psyche or customer impressions. Pay attention to what things look like and what is the state of the physical environment around you. It may signal deeper problems or an overall neglectful view of the business.

We all have stories about what we’ve witnessed. I remember walking past a locked closet and smelling a damp odor. I could have just ignored it, thought it was just me, or figured that someone else was probably aware of it. Instead, I decided to mention it to the facilities manager of the location. And, lo and behold, behind the rightfully locked door a roof leak had infiltrated the space and it was a wiring closet. It could have been a big problem if it were ignored for any length of time.

So, what’s an internal auditor to do?

Keep your eyes and ears open as you go about your work. Does something seem amiss regarding the physical location? Mention it to someone who could do something about it. What’s the worst that could happen? They tell you “thanks, we are aware of it.” At best, you help address an issue before it gets out of hand. Sometimes we all become blind to our physical surroundings because we’ve just been there for so long. But a fresh set of eyes and ears might just help the organization out and make employees and customers even more appreciative of the physical space they show up to and that the organization spends so much money on. Internal audit can have a unique perspective of noticing what gets unnoticed.

4
The Parking Lot Check: Is Fraud Hiding in Plain Sight?

Closely related to the physical state of the facilities is the state of the employees. Ever see a change in someone’s habits that don’t sync-up with what has gone on in the past, and you wondering “what’s up with that?” Perhaps someone is showing up to the office in a new luxury car, expensive clothes, or talking about some lavish vacation they went on?

Most often, there is a great explanation, and it is none of our business. But, also, any of us who have been around the block a few times will also know that, occasionally, these changed behaviors are clues that something is amiss and that someone may be on the take. You could call this “doing a parking lot audit.” So many frauds and embezzlements have left a trail of these clues as the perpetrator wanted to channel their ill-gotten gains into the fruits of luxury and apparent success. It’s not an outright indicator or fraud, of course, but it might be a red flag to dig deeper, especially if things weren’t adding up already.

So, what’s an internal auditor to do?

Just keep your eyes and ears open, being observant to uncharacteristic behaviors, purchases, and chatter could provide clues to someone who is taking advantage of their position and situation to pilfer from your company. No, don’t go around accusing people of things where you have no proof, of course. But eyes open and be vigilant. And, if you see something, say something to a trusted colleague within your internal audit department. If necessary, elevate it within your department and, if warranted and approved, do some follow-up in a clandestine manner. You may just catch something in its preliminary stages and head it off at the pass, so to speak. Most people steal from the company in small increments, and it escalates from there if they feel they are getting away with it undetected. But, in hindsight, there were usually always clues … perhaps no further away than in the parking lot.

5
Hotline Activity: Is Volume Up, or Has Volume Decreased?

Most internal audit functions have some role in monitoring their organization’s whistleblower hotline for employees, and sometimes also third parties, to file complaints. This may seem like a no-brainer, but you’d be surprised how often small complaints (that point to bigger problems) go unnoticed. Your internal audit function may have complete ownership of managing what comes though, you may partner with someone else in the organization, such as compliance, human resources, or legal, or you just get things passed to you for review or investigation as needed from one of these organizational partners. Regardless, you need to have some role in monitoring the volume of activity. What types of activity are coming through? Are there recurring issues? What are the trends? It doesn’t take an audit, but it does take awareness. Changes in volume can be very telling, and that could be changes in either direction (increased or decreased volume).

Increases in activity might spell some brewing issues of a more macro sense and, alternatively, decreases in volume may spell a level of distrust in the confidentiality of the hotline or a perceived lack of seriousness with which reported items might be getting addressed.

So, what’s an internal auditor to do?

It doesn’t have to be you, so long as someone in your internal audit function is attuned to the trends, both in terms of volume and types of activity. And, if there are notable changes in the trends, up or down, it might be time for a deeper understanding of what might be going on. This could be a signal of troubles brewing that are inconsistent with the desired culture.
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To be clear, internal auditors don’t need a formal audit plan initiative to keep abreast of important developments in the organization. It’s not easy, I know, as the formal audit plan has us busy enough, but a little observation may go a long way. Head up, eyes and ears open, use all your senses and leverage your well-honed intellectual curiosity and professional skepticism. Do some ad-hoc auditing of things you might not be able to (upper case) Audit and don’t necessarily make it to the formal audit plan. The organization will be better for it, and you will enhance your engagement and contributions innumerably.

As popularized in the Spiderman comics of yesteryear and said in more recent movies, “with great power comes great responsibility.” Wield it judiciously!

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