Spreading Organizational Happiness Through Internal Auditing. Adil Buhariwalla Crowe Horwath Partner, Internal Auditing & Risk Consulting

Transcription

1 Spreading Organizational Happiness Through Internal Auditing Adil Buhariwalla Crowe Horwath Partner, Internal Auditing & Risk Consulting 1

2 Happiness & Internal Audit, in the same sentence??? 2

3 I Can Relate to this.. I m An Internal Auditor I firmly believe that our work involves spreading Happiness & Positivity And we can, and should, do it without compromising our Integrity & Professionalism And, most important, without ending-up in the LOONY BIN 3

4 Happiness & Positivity Organizational Happiness Through Internal Auditing Organizational Happiness Internal Auditing

5 Definition of Happiness - Wikipedia In psychology, happiness is a mental or emotional state of well-being which can be defined by positive or pleasant emotions, ranging from contentment to intense joy In philosophy, happiness refers to the good life 5

6 Positivity Is the frequent experience of pleasant emotions 6

7 Happiness & Positivity Analysis Well-being = the state of being comfortable, healthy, or happy Positive or pleasant emotions = joy, interest, contentment, love, and the like are moments in which a person is not plagued by negative emotions such as anxiety, sadness, anger, and despair Good Life = A good life is when your outlook is that you have more good days than bad, when life is generally a blessing not a burden 7

8 Organizational Happiness A Happy Organization = A Successful Organization 8

9 Organizational Happiness (OH) There are 4 essential key success measures: Financial viability Customer satisfaction Employee satisfaction Various factors negatively influence these success measures, resulting in Organizational Unhappiness (OU) OH is influenced by ability to overcome the OU Factors Contribution to society 9

10 Factors Impacting (Risks to) Organizational Happiness Organizational Unhappiness Factors Increasing litigation Legislation Regulations Compliance Information security breaches People management Fraud Financial constraints Ever-growing competition Low productivity Reengineering Deregulation Political crises Etc. 10

11 Happiness & Positivity Organizational Happiness Through Internal Auditing Organizational Happiness Internal Auditing

12 Definition of Internal Auditing 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 12

13 Happiness and Internal Audit The Connection Happiness Internal Auditing Mental or emotional state of wellbeing Positive or pleasant emotions Good Life Organizational Success An independent, objective assurance and consulting activity Designed to add value and improve an organization's operations It helps an organization accomplish its objectives Improve the effectiveness of risk management, control, and governance processes 13

14 The IA Definition - Words resonating happiness and positivity Add value Improve Operations Help accomplish Improve Effectiveness 14

15 Why Happiness & Internal Auditing = Insanity? Awareness (Advocacy) Don t know about IA. Have some vague idea about IA Heard/Read the definition and did not understand it Experiences (Hard + Soft Skills) Have had an unpleasant experience with IA Have known Auditors to only find fault Perception (Outcome of Advocacy and Experiences) Belief that you should run the other way when you see an Auditor Belief that IA only looks at numbers Oh so boring! 15

16 Don t know about IA. Have some vague idea about IA Heard/Read the definition and did not understand it AWARENESS (ADVOCACY) When I Say Internal Auditor, You Think

17 Definition of Internal Auditing An in-depth look 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 17

18 When We Say Internal Auditing Why 18

19 Understanding Internal Auditing Seriously Daunting 19

20 Understanding the definition of Internal Auditing Independence & Objective Freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner Assurance Involves objective assessment of evidence to provide an independent opinion or conclusions regarding an entity, operation, function, process, system, or other subject matter Consulting Advisory services which are intended to improve an organization s governance, risk management, and control processes 20

21 Add Value An improvement or addition to something, that makes it worth more IA Definition Designed to add value and improve an organization's operations Why not just say, improve 21

22 Add Value The internal audit function should be able to: tell when the company is not being managed well, detect where critical risks are not being identified or properly managed, identify when the business objectives are not likely to be met, act as a training ground for future line managers, provide a one stop shop for best practice advice, provide an independent, objective opinion as to the quality of the business controls, stimulate risk awareness throughout the organization Source: Value-Added Internal Audit: Myth or Reality: Jean Pierre Garitte 22

23 Add Value The internal audit function should be able to: act as a source of qualified, experienced talent that can aid management in business improvement programs, provide specialist professional independent opinions, report on fraudulent activity within the organization, ensure that the company-wide initiatives, such as a code of conduct, are being adhered to, make Senior Management and the Board sleep well at night Source: Value-Added Internal Audit: Myth or Reality: Jean Pierre Garitte 23

24 Risk Management, Control and Governance Risk Management involves assessing risks and devising methods for managing them so that the organization's objectives can be better achieved Control (Internal Control) is a method employed by management to address risks that affect the achievement of the organization's objectives Governance It is the overall system implemented by the Board/Senior management to direct and oversee the activities of the organization 24

25 The No Jargon Internal Audit Definition Internal auditing is an independent, objective [activity free from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner], assurance [which involves objective assessment of evidence to provide an independent opinion or conclusions regarding an entity, operation, function, process, system, or other subject matter], and consulting activity [includes Advisory services which are intended to improve an organization s governance, risk management, and control processes] designed to add value [tell when the company is being poorly managed, detect where critical risks are not being identified or properly managed, identify when the business objectives are not likely to be met, act as a training ground for future line managers, provide a one stop shop for best practice advice, provide an independent, objective opinion as to the quality of the business controls, stimulate risk awareness throughout the organization, act as a source of qualified, experienced talent that can aid management in business improvement programs, provide specialist professional independent opinions, report on fraudulent activity within the organization, ensure that the company-wide initiatives, such as a code of conduct, are being adhered to, make Senior Management and the Board sleep well at night] 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 [how risks are assessed and methods are devised for managing them so that the organization's objectives can be better achieved], control [methods employed by management to address risks that affect the achievement of the organization's objectives], and governance processes [overall systems implemented by the Board/Senior management to direct and oversee the activities of the organization] 25

26 Advocacy: A simpler, clearer (and happier) way of explaining Internal Audit Internal Audit is a function designed to assist an Organization in accomplishing its business objectives This includes evaluating and improving the organization s processes and procedures, how its risks are managed and the way it is governed. 26

27 Have had an unpleasant experience with IA EXPERIENCES (HARD & SOFT SKILLS) Have known Auditors to only find fault

28 Internal Audit Mission 28

29 Internal Audit Core Principles The Core Principles for the Professional Practice of Internal Auditing state: Demonstrates integrity Demonstrates competence and due professional care Is objective and free from undue influence (independent) Aligns with the strategies, objectives, and risks of the organization Is appropriately positioned and adequately resourced Demonstrates quality and continuous improvement Communicates effectively Provides risk-based assurance Is insightful, proactive, and future-focused Promotes organizational improvement 29

30 The Real Internal Auditing Quite Often Demonstrates integrity Demonstrates competence and due professional care Is objective and free from undue influence (independent) Independence not correctly practiced CAE reports to the CFO, quite common. Hence, scope limitations, viewed as bean counter, etc. Independence not correctly understood Results in You vs We 30

31 2018 Crowe Horwath International 31

32 The Real Internal Auditing Quite Often Demonstrates integrity Demonstrates competence and due professional care Is objective and free from undue influence (independent) Aligns with the strategies, objectives, and risks of the organization Is appropriately positioned and adequately resourced Demonstrates quality and continuous improvement Communicates effectively Provides risk-based assurance Is insightful, proactive, and future-focused Promotes organizational improvement 32

33 Belief that you should run the other way when you see an Auditor PERCEPTIONS Belief that IA only looks at numbers Oh so boring!

34 The Bottom Line Inadequate/Incorrect Advocacy Negative Experiences due to Inadequate/Poor Hard & Soft Skills Internal Auditing is seen as non-value adding 34

35 Hard Skills - Proficiency & Due Professional Care Internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities. The internal audit activity collectively must possess or obtain the knowledge, skills, and other competencies needed to perform its responsibilities (Standard 1210) Internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor (Standard 1220) 35

36 Soft Skills Are personal attributes that enable someone to interact effectively and harmoniously with other people Includes Communication Skills 36

37 The Internal Auditor s Work Involves a high degree of interaction with people in the company and outside Internal Audit is a people-oriented job where: You spend at least two hours of your day communicating with other people You deal directly with customers, internal to the organization You spend a lot of time on the phone at work You supervise one or more people You help people solve problems Understanding your own emotions and reactions as well those of people we interact with, is a core skill required by Internal Auditors 37

38 Emotional Intelligence The ability to understand and manage one s own emotions, and accurately assess others emotions 38

39 Emotional Intelligence Quadrant 39

40 Typical behaviors of people high in emotional intelligence Bring out the best in others Make people feel more at ease in times of crisis or difficulty; are focused on solutions Manage their feelings well Successfully manage difficult situations Are naturally confident Know how others around them are feeling negative emotions Generally approach people with a WIIFY (what s in it for you?) attitude, rather than a WIIFM (what s in it for me?) perspective Know their own mood most of the time understand why they feel the way they do Manage the emotions of people around them, making those people feel more at ease 40

41 How to improve your Emotional Intelligence Reflect on your own emotions Become more mindful of your own emotions and reactions - build control Observe Be more observant of your current emotions. Selfreflection will help you to be more in tune with what you're feeling 41

42 How to improve your Emotional Intelligence Ask Why? Demonstrate qualities such as empathy and compassion - see a situation through another person's eyes. Showing true empathy means exploring the "why": Why does this person feel the way (s)he does? Learn from criticism Quite often, there is truth in criticism. When you receive negative feedback, put your feelings aside and try to learn from the situation. Don t get angry and let emotions get the better of you Practice regularly It is impossible to have perfect control over your emotions. Learning to improve your emotional intelligence is a process that does not happens overnight 42

43 How to improve your Emotional Intelligence Ask Why? Demonstrate qualities such as empathy and compassion - see a situation through another person's eyes. Showing true empathy means exploring the "why": Why does this person feel the way (s)he does? Learn from criticism Quite often, there is truth in criticism. When you receive negative feedback, put your feelings aside and try to learn from the situation. Don t get angry and let emotions get the better of you Practice regularly It is impossible to have perfect control over your emotions. Learning to improve your emotional intelligence is a process that does not happens overnight 43

44 Bold Steps To Transform Internal Audit Richard Chambers 1. Forge a strategic vision for change Transformation must be preceded by commitment A formal strategic plan should embrace the need and desire to change Aspirations and expectations of stakeholders should be solicited and form the basis for this vision The conversation must be open and candid Open stakeholders' eyes to emerging practices in the internal audit field 44

45 Bold Steps To Transform Internal Audit Richard Chambers 2. Invest in relationships The most critical component of "trusted advisor" is trust, and trust depends on a solid relationship The entire internal audit team must be invested in the process 3. Expand the emphasis of internal audit reports One place where internal audit departments can make real progress is in the transformation of reporting Too many internal audit reports remain focus on negative results from the past Assurance should be accompanied by insight. Open the audit reports with an overview of management's accomplishments Share corporate or industry leading practices for management's consideration 45

46 Bold Steps To Transform Internal Audit Richard Chambers 4. Connect the dots One of the most common concerns of audit committee members is that internal audit is reluctant to summarize its work in a "what does it all mean" way, namely "connecting the dots." Provide opinions on the overall effectiveness of controls or risk management. Such assessments/opinions can prove valuable to management and the board 5. Continuously back up words with deeds Chief audit executives and their staff must take a long-term view of transformation and continuously back up words with deeds Don t slide back into a traditional mode Be the agent of change in your department 46

47 Internal Auditing Blur To Clear ADVOCATE & EDUCATE TO ELEVATE & SET-STRAIGHT Internal Audit Internal Audit Internal Audit Internal Audit Internal Audit 47

48 Spreading Happiness Through Internal Auditing 48