THE FUTURE OF INTERNAL AUDITING: GARDENER OF GOVERNANCE

Abstract

Internal Auditing is a profession at crossroads. On the micro level, in organizations and institutions, stakeholders may see less and less value in the contributions from internal auditing and on a macro level, this projection jeopardizes the legitimacy and relevance of internal auditing as a profession. The good and bad news is that the future is uncertain. This article suggests five main fields of action and focus for the IIA Global – The Institute of Internal Auditors, its local chapters, internal auditors and academia that will determine the future role of internal auditing, its legitimacy, its relevance and its organizational and societal significance. The purpose of this article is to provide comprehensive content suggesting five concrete paths for the betterment of internal auditing. The five directions that deserve development are planet, public, profession, prosperity and people. Ultimately, positioning internal auditing as Gardener of Governance is a promising metaphor to strengthen its value proposition, both on a micro and on a macro level. Metaphors are an important way to convey ideas and make ideas stick.

Acknowledgments

Rainer is grateful and thanks all chapters of the IIA Nordics for the opportunity and invitation to speak in October 2021 about The Future of Internal Auditing: IIA Denmark, IIA Finland, IIA Iceland, IIA Norway and IIA Sweden.

For discussions, perspectives and input when preparing the presentation on 08. October 2021, Rainer thanks Thomas Braun, Barrie Enslin, Dr. Dominik Foerschler, Prof. Kim K. Jeppesen, Prof. Christopher Koch, Anthony Pugliese, Prof. em. Jeffrey Ridley, and Prof. em. Laura Spira.

When crafting this article, we thank David Jackson for proofreading our manuscript.

We thank the reviewers of our paper for their comments and suggestions, and we thank Dan Swanson, the Managing Editor of EDPACS, for the opportunity.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author(s).

Notes

1. 70 years of IIA in the Nordics: Join the 70th anniversary celebration and meet IIA President and CEO Anthony J. Pugliese, https://iia.no/activities/70-years-of-iia-in-the-nordics/

2. World Economic Forum (2020), The Future of Jobs Report 2020, page 30, https://www.weforum.org/reports/the-future-of-jobs-report-2020

3. Link to the original presentation: https://drrainerlenz.files.wordpress.com/2021/10/the-future-of-internal-auditing-dr.-rainer-lenz-70th-anniversary-scandinavian-iia-chapter-08oct21.pdf

4. Inspired by www.zukunftsinstitut.de, Megatrends 2021: “Zeit für eine Revision”, and complemented by our own reflections

5. According to the American Institute of Certified Public Accountants (AICPA), audit data analytics (ADAs) are techniques that help auditors leverage current technologies and move toward a more data-driven approach to planning or performing an audit. While audit data analytic techniques are often applied to external audits, they can be applied to internal audit engagements as well (https://www.aicpa.org/, accessed on 22 December 2021).

6. CELONIS is the pioneer of Process Mining, now a Decacorn start-up with a valuation exceeding USD 10 bn, https://www.celonis.com/

7. United Nations, 2015. https://sdgs.un.org/2030agenda, accessed on 11 October 2021

8. Gabriel (2020), page 344: “Die Gesellschaft wird nach Corona nicht mehr so sein können wie jene zuvor.“

9. The UK hosted the 26th United Nations (UN) Climate Change Conference of the Parties (COP26) in Glasgow from 31 October – 13 November 2021, websites accessed on 23 December 2021, https://ukcop26.org/, https://en.wikipedia.org/wiki/2021_United_Nations_Climate_Change_Conference

10. Lenz, R. (2013) alludes to that risk three times in his PhD thesis, pages 35, 110, and 191

11. Further recommended reading: Gert Vercaeren (2021) Humanizing Strategy: How to Master Emotions, Values and Beliefs When You Execute Plans

12. Pagnamenta (2021), Blog from 29 September 2021

13. IPPF (2017)

14. LinkedIn, dialogue with Prof. em. Laura Spira, 16 July 2021, when preparing the presentation at IIA Nordics on 08 October 2021, https://www.linkedin.com/in/laura-spira-a9268a5

15. Lenz, R. and Hahn, U. (2015)

16. Lenz, R. (2013), page 31

17. Study about Internal Audit in Austrian organizations: “Interne Revision: Großer Handlungsbedarf bei IT-Sicherheit, Gender-Pay-Gap, politischer Einflussnahme und Korruptionsvermeidung“, https://presse.skills.at/News_Detail.aspx?id=140884&menueid=25063

18. LinkedIn, Norman Marks’ (Globally recognized risk management and internal audit thought leader), comment on 10 October 2021

19. Lenz, R. (2013), p. 36

20. Lenz, R. (2013), pp. 35–36

21. The authors suggest viewing internal auditors as farmers is a promising metaphor with which to position internal audit and strengthen its value proposition.

22. Bhavani Jois’ (Associate Vice President and Head - Internal Audit & SOX at Infosys), comment on LinkedIn, 23 January 2022

23. Lenz (2017a) and (Lenz, 2017b)

24. Sarens, G., Lenz, R. & Decaux, L. (2016), building on the metaphor of farmer

25. Garyn (2021) citing Lenz R. in his blog when speaking about empathy.

26. Lenz (2017a) and (Lenz, 2017b)

27. Accessed online 11 October 2021, https://www.brainyquote.com/quotes/mario_andretti_109743

28. Press release SAF-HOLLAND SE, 25 March 2021: “The net cash flow from operating activities in the 2020 financial year came to EUR 137.9 million, 52.4% above the level of the comparable period of the previous year of EUR 90.5 million. The increase is mainly attributable to the positive contribution from net working capital management. The Cash-is-King project initiated in April 2020 played a major role in this regard. As a result, it was possible to sustainably reduce overdue receivables in all regions and improve the management of inventories.”

29. Lenz, R. (2013, p. 3): “The Latin word ‘audire’ means ‘to hear’ in English. As Ridley (2008, 293) states, “the right questions will always be the key to effective internal auditing. So will be right listening!” There is a deeper meaning in the fact that humans have two ears and one mouth (so that we can listen twice as much as we speak). That may be particularly good advice for internal auditors.”

30. https://global.theiia.org/edu-events/Pages/Academic-Relations.aspx

31. Dominik Foerschler and his team at the ARC-Institute organized the European Audit Championship 2021. Please see the YouTube video of the Grand Finale from September 2021: https://www.youtube.com/watch?v=GDXjjsIDnT8

32. World Economic Forum (2020), The Future of Jobs Report 2020, page 30, https://www.weforum.org/reports/the-future-of-jobs-report-2020

Additional information

Notes on contributors

Rainer Lenz

Rainer Lenz, PhD, CIA, CIIA is Director Corporate Audit and Advisory Services at SAF-HOLLAND SE. He is a seasoned finance and audit professional with 30 years of international experience as Divisional & Regional CFO and Chief Audit Executive in global organizations. PhD about the effectiveness of internal auditing from the Louvain School of Management in Belgium. He has published a series of articles about internal auditing in peer reviewed academic journals and has earned several awards for his thought leadership. He has a teaching assignment at the Johannes Gutenberg University in Mainz and can be reached at [email protected]

Kim K. Jeppesen

Kim K. Jeppesen is Professor of auditing at Copenhagen Business School and is the author of a number of papers on internal auditing in International Journal of Auditing, European Accounting Review and EDPACS. He is Program Director for the Master in Accounting and Auditing at CBS, where he teaches financial auditing, internal auditing, audit data analytics and fraud investigation. He is also on the board of the Danish IIA Chapter. He can be reached at [email protected]