Is Internal Audit the Next Blackberry?

Abstract

Over the past decades there has been a series of major corporate governance crises. After each wave post-mortems were convened and efforts made by regulators to identify root causes. The good news—or bad, depending on your perspective—for the internal audit profession is that rarely were questions raised by those commissions and regulators about the role internal audit should have played to avoid the current crisis being reviewed.

What the commissions did call for was a massive global focus on the need for boards of directors to better oversee risk in their organizations. As pressure on directors mounts globally to improve risk oversight, their dissatisfaction with traditional internal audit services is also growing. This article suggests the root cause of the mounting internal audit customer dissatisfaction globally is internal audit “paradigm paralysis”¹—a strong attachment to traditional ways of doing internal audits that no longer meet the needs of key customers. Specific recommendations are made to help internal auditors transition past the paradigm paralysis and adopt new methods that better meet the needs of its key customers. *This article first appeared in ACCA UK’s Internal Audit e-bulletin.

Notes

1. Source: http://newsjunkiepost.com/2011/09/04/will-we-have-a-global-paradigm-shift-away-from-obsolete-ideologies/

2. “To Be Agents of Change Internal Auditors Must Embrace Change.” Retrieved from https://iaonline.theiia.org/blogs/chambers/2016/Pages/To-Be-Agents-of-Change-Internal-Auditors-Must-Embrace-Change.aspx

3. “2016 Global Chief Audit Executive (CAE) Survey.” Retrieved from https://www2.deloitte.com/us/en/pages/audit/articles/global-chief-audit-executive-survey.html

4. Author’s definition: Value Creation Objective: Objectives key to the long-term success of the enterprise that will create enhanced shareholder value. (e.g., increase market share by 20%). Value Preservation Objective: Objectives that, if not achieved, have significant potential to erode stakeholder value. (e.g., ensure reliable financial statements) disclosures).

5. For more details see Joel A. Barker, “The New Business of Paradigms.” Retrieved from http://www.joelbarker.com/speeches/classic-speeches/the-power-of-paradigms/

6. See Norman Mark’s October 14, 2016 IIA blog,“Focusing on the Wrong Line of Defense” as an example. Retrieved from https://iaonline.theiia.org/blogs/marks/2016/Pages/Focusing-on-the-wrong-line-of-defense.aspx

7. For more on the illusion of assurance see IIA CEO Richard Chambers’ October 24, 2016 blog post “No Internal Audit: It Could Be Worse.” Retrieved from https://iaonline.theiia.org/blogs/chambers/2016/Pages/No-Internal-Audit-It-Could-Be-Worse.aspx

Additional information

Notes on contributors

Tim Leech

Tim J. Leech, FCPA, CIA, CRMA, CCSA, CFE, is managing director at Risk Oversight Solutions Inc., based in Oakville, Ontario, Canada and Sarasota, Florida. He has over 30 years of experience in the risk governance, internal audit, IT, and forensic accounting/litigation support fields. Leech has provided training for tens of thousands of public and private sector board members, senior executives, professional accountants, auditors, and risk management specialists in Canada, the United States, the European Union, Australia, South America, Africa, and the Middle and Far East. He has received worldwide recognition as a pioneer, thought leader, and trainer. His article “Reinventing Internal Audit,” featured in the April 2015 issue of Internal Audit, received the Outstanding Contributor award from the IIA. He can be reached at [email protected].