Guarding the Public Trust: Are You Up to the Challenge?

Transcription

1 Guarding the Public Trust: Are You Up to the Challenge? John Wszelaki, CIA, CRMA, CFE Director, American Center for Government Auditing The Institute of Internal Auditors New York Government Conference January 26, 2018

2 Presentation Overview The unique nature of government auditing Challenges facing government auditors What corporate CAEs could learn from their government counterparts What government CAEs could learn from their corporate counterparts The Third Line of Defense Enduring lessons from my career Five Internal Audit Resolutions for 2018 and Beyond Parting thought

3 The Unique Nature of Government Auditing Missions Stakeholders Processes and standards Operating environment Definitions of success

4 The IIA s View: An effective public sector audit activity strengthens governance by materially increasing citizens ability to hold their public sector entity accountable. Source: Supplemental Guidance: Public Sector Definition and the Role Of Auditing in Public Sector Governance, 2012 The Institute of Internal Auditors

5 Key Challenges Facing Government Auditors Continued fiscal stress on the public sector Corresponding stress on agency and elected officials Constrained budgets of the audit function The pressure on auditors to demonstrate value The mandate to be risk-centric and agile

6 Auditing at The Speed of Risk The winds of risk shift rapidly Emerging risks: Cybersecurity Business continuity Data privacy Geopolitical instability 21st century technology risks - Cloud computing - Mobile technology - Internet of Things (IoT) The good news: 91% assess risks 85% develop risk-based plans Yet we are not auditing at the speed of risk 63% update audit plans no more than twice a year 15% have highly flexible plans 31% don t update risk assessments Only 21% deploy continuous risk assessment methodologies

7 The IIA s View: Essential Elements for Public Sector Audit Organizations 1. Organizational independence 2. A formal mandate 3. Unrestricted access 4. Sufficient funding 5. Competent leadership 6. Objective staff 7. Competent staff 8. Stakeholder support 9. Professional audit standards Source: Supplemental Guidance: Public Sector Definition and the Role Of Auditing in Public Sector Governance, 2012 The Institute of Internal Auditors

8 5 Things Corporate CAEs Could Learn From Their Government Counterparts 1. Keep your eye on reputational risks 2. Continuously strive for independence and objectivity 3. Add value by assessing operational controls 4. Continuously invest in training and development for your staff 5. Embed strong processes and controls to ensure quality

9 5 Things Government CAEs Could Learn From Their Corporate Counterparts 1. Maintain a risk-based focus 2. Don t lose sight of stakeholders expectations 3. Emphasize efficiency in audit processes 4. Continuously benchmark against best practices 5. Deploy rotational staffing strategies

10 Government Audit as The Third Line Of Defense

11 Enduring Lessons Learned During My Audit Career 8 Lessons learned

12 Enduring Lesson #1: Never forget that you are auditing in the theatre of politics.

13 Enduring Lesson #2: Make sure your glass house is shatterproof before you throw stones.

14 Enduring Lesson #3: Everyone loves a watchdog until it barks!

15 Enduring Lesson #4: You can be right 1,000 times, but you can t afford to be wrong once.

16 Enduring Lesson #5: Little stones can cause the biggest waves!

17 Enduring Lesson #6: Everyone in the organization is important and the more people you know the easier your job becomes.

18 Enduring Lesson #7: Continuously look to expand your network of peers and professionals.

19 Enduring Lesson #8: Teamwork builds overall success.

20 Amazing Things I Have Seen in My Career Fraud committed using staples Companies submitting consecutive invoices for no work performed Trusted financial officials becoming bored and committing Amazing fraud Things I Have Seen in My Career There is real money in trash Smile you are on candid camera

21 Amazing Things I Have Seen in My Career Technology Advances and Uses People Are Oblivious to The Consequences of Their Actions The Mafia Really Does Exist Amazing Documentation Things of I Facts Have Is Seen Keyin My Career Moonshining Does Exist in 2018

22 Five Internal Audit Resolutions for 2018 and Beyond From Richard F. Chambers President and CEO, The IIA

23 1 Maintain a Laser Focus on the Horizon Need to step out of our comfort zone of financial, compliance, and operational auditing. Start thinking about geopolitics, macroeconomics, cybersecurity, technology, and other emerging risks to your organization.

24 2 Take the Offense in the War on Talent How does your organization obtain and retain the best talent? You need to understand the risks your organization faces and make sure you and your staffs have the requisite skills to audit them. Hire talent or co-source to expand your ability to audit specialized risks or those that require specialized expertise and skill sets.

25 3 Sharpen and Deploy the Best Navigation Tools We must employ tools available to internal auditing from audit management systems, data analytics, and artificial intelligence to new technologies that will inevitably emerge The challenge we face is to identify and embrace technology that will make internal audit functions agile and future focused

26 4 Innovate Your Way Through Transformation Internal audit should champion transformation built on innovative thinking and actions. This may require some changes if the corporate culture is averse to failure. Innovation involves trial and error and any culture that fixates on failure will struggle to innovate.

27 5 Sail Toward the Storms Great internal audit departments do not fear difficult or uncomfortable topics. They sail towards storms in order to alert management and the Board when risks are not being managed and controls are not adequately designed and implemented. Internal audit may sometimes be the lone and unwanted voice alerting the organization to risks and problems subjecting us to a shoot the messenger environment. Courage and doing the right thing will get you through the storm.

28 Parting Thought! With light comes heat, and with heat comes action, and action is what we want. How can we make government work better? By improving the economy, efficiency, and effectiveness of government. David M. Walker Former Comptroller General of the United States

29 Questions? John Wszelaki, CIA, CRMA, CFE Director American Center or Government Auditing The Institute of Internal Auditors