STOP ACTING LIKE AUDITORS!

Transcription

1 STOP ACTING LIKE AUDITORS! THE HUMAN SIDE OF AUDITING Steve Goodson, Lecturer The University of Texas, McCombs School of Business CIA, CGAP, CCSA, CISA, CRMA, CLEA May 6, 2016

2 What would you say you do here?

3 Internal Audit Mission To enhance and protect organizational value by providing riskbased and objective assurance, advice, and insight.

4 Session Objectives Discuss the characteristics of the internal audit profession in 2016 Discuss the teachings and philosophy of Larry Sawyer, the father of modern internal auditing Discuss the importance of the human side of auditing Share experiences of group members

5 Session Objectives (Continued) Review examples of things to avoid in working with management and staff Given enough time: Provide an overview of the Johari Window model for interpersonal communication Develop a personal development plan for enhancing interpersonal, communication, and facilitation skills.

6 IIA Common Body of Knowledge Study Feedback from more than 13,500 audit practitioners in over 160 countries

7 IIA Common Body of Knowledge Study Characteristics of an Internal Audit Activity Core Competencies for Today s Internal Auditor

8 Characteristics of Internal Audit 2016 The IA focus has changed significantly Less emphasis on: * operational and compliance audits * financial risks * fraud investigations * internal control evaluations

9 Characteristics of Internal Audit 2016 New emphasis on: corporate governance Enterprise Risk Management strategic reviews ethics audits migration to IFRS Standards integrated Reporting

10 Top Core Competencies Communication skills Problem identification and solution skills Understanding the business Interpersonal skills

11 Other Core Competencies Ability to promote the value of IA Organizational skills Conflict resolution/negotiation skills Staff training & development Change management skills Actg frameworks, tools, & techniques IT / ICT frameworks, tools, & techniques Data Analytics

12 IIA Guidance IIA Standard 2420 Quality of Communications Communications must be accurate, objective, clear, concise, constructive, complete, and timely. Practice Advisory

13 Lawrence B. Sawyer Father of Modern Internal Auditing ( )

14 Sawyer Internal Auditor Articles The Human Side of Auditing The Leadership Side of Auditing The Political Side of Auditing The Creative Side of Auditing

15 Sawyer s Words of Wisdom Popular IIA publication (2004) Idea came from Texas Leadership Program Compilation of 25 Internal Auditor articles Timeless Advice

16 Sawyer s Internal Audit Philosophy When you point your finger, make sure your fingernail is clean. The best question is Mr. or Ms. Manager, how do you satisfy yourself that...? Politics and culture will win over rules and regulations. Leave every place a little better than you found it.

17 Sawyer s Internal Audit Philosophy Know the objectives. Nothing ever happens until somebody sells something. Every deficiency is rooted in the violation of some principle of good management.

18 Sawyer s Key Points The Audit Process Reasons for conflict: Fear of change, exposure, and noncompliance Audits breed conflict and differences in opinion Every audit finding is an implied criticism

19 Sawyer s Key Points Auditor Image General perception of auditors not flattering Arrogant, demanding, and overbearing vs. professional, helpful, and supportive Downputters and naysayers. Looking for something wrong

20 Sawyer s Key Points Relating to the Auditee Auditor style and approach makes a difference Understand management s needs, motivations and styles Emphasize condition and action to correct

21 Sawyer s Key Points Reporting Discuss potential issues and recommendations well in advance No nitpicking Explain the positive results of audits Give credit for outstanding achievements No surprises

22 Sawyer s Key Points The Road Ahead Cultivate a better understanding of feelings Don t attach blame Explain the audit process Adopt a more positive reporting style Obtain top management support Use a cooperative, problem-solving approach

23 Improving Communications How can you better assure that you communicate more effectively?

24 Improving Communications Some Ideas to Consider Audit Communications General Communications Consultant Role Integrity Organization/Team Spirit Leadership Build Relationships

25 Audit Communications Give management benefit of the doubt Catch a manager doing something right Report on positive findings and results Discuss noteworthy achievements Do your homework Be sensitive to the stress and workload demands of others

26 Audit Communications (Continued) No surprises Solicit ideas and suggestions Poll the table for comments and opinions Discuss timelines and expectations Be willing to hear management out

27 General Communications Make personal contacts regularly Use notes, s, and voice mails Encourage hallway conversations Take a manager to lunch Work on your problem relationships

28 General Communications (Continued) Have some knowledge about the person and the subject matter Listen to what the others are saying Don t interrupt Confirm and expand on areas of agreement Seek and find opportunities to negotiate

29 Consultant Role Share relevant information (external auditors, IIA, industry audit groups) Provide copies of articles of interest Obtain relevant policies, procedures, and practices from other organizations Share heads up information on audits and other items (non-confidential)

30 Integrity Follow-up on commitments made Live by the Golden Rule Show trust and respect Get involved with accountability, ethics, and governance issues Build and keep trust

31 Organization/Team Spirit Serve on committees, workgroups, etc. Volunteer for activities benefiting the organization Establish partnerships with CFO, Legal, HR, IT, Communications, and others Initiate contacts with new managers Enhance and nourish current relationships

32 Leadership Attend management & Board meetings Invite managers to IA staff meetings Welcome opportunities to talk about risk, controls, and governance Lead by example Have a positive attitude Balance organizational and professional duties

33 Leadership (Continued) Consider serving in a management position Be flexible Develop a sense of humor Ask for feedback and listen to it Be approachable Practice MBWA

34 Building More Effective Relationships Survey of Chief Audit Executives What are their ideas? What can we learn about effective relationships?

35 Ideas from Several Chief Audit Executives Peer group informal survey 9 experienced CAEs responded Tips on how to build good relationships with management? Things to avoid in working with management?

36 CAE Tips Building Good Relationships No surprises and no hidden agendas! Be a working member of the team Treat managers as partners in the process Ensure involvement and buy-in Serve on IT and other workgroups Participate with management on teams

37 CAE Tips Building Good Relationships Communicate, communicate, communicate! Learn management communication preferences Return calls and messages promptly Plan and deliver organized meetings Have an open door policy Relieve the tension of the audit process

38 CAE Tips Building Good Relationships Aim for objectivity and balance Ensure objectives are clearly understood up front Discuss management expectations Discuss issues/concerns as they develop Use positive terms when appropriate Focus on outcomes and solutions

39 CAE Tips Building Good Relationships Share preliminary findings/issues Solicit management thoughts and ideas Incorporate management s input Aim for mutually agreed solutions Acknowledge strengths and accomplishments (Standard )

40 CAE Tips Building Good Relationships Remember that relationships are long term Trust and respect are important Gain knowledge of operations and management Be available in times of crisis Cover the who, what, when, where, why and how

41 CAE Tips Building Good Relationships Have a customer service attitude Be a problem solver Get involved in understanding the complexities of programs and activities Attend Board committee meetings and learn more about the organization Attend training on organization initiatives

42 CAE Tips Building Good Relationships Get involved with strategic planning, IT planning and the budget process Check laws, regulations, policies and history Attend legislative and other regulatory oversight meetings Obtain a seat at the management table Keep executive management & Board informed Be an effective liaison with external auditors

43 CAE Tips Opportunities to Provide Courtesy Information Provide status on internal or external audits Share the perspective of a Board member/ manager on an issue or concern Provide draft information on Audit Committee meeting topics

44 CAE Tips Opportunities to Provide Courtesy Information Provide heads up on coming events Give news of IA staff members achieving certification Congratulate on good presentation or other achievement

45 CAE Tips Opportunities to Send Thank You Notes Participation in risk assessment/audit Plan interviews Presentations at Audit Committee meetings Attendance at staff meetings (yours or theirs)

46 CAE Tips Opportunities to Send Thank You Notes Timely and relevant information/referral provided Important advice or assistance rendered Participation in IA-sponsored initiatives

47 CAE Tips Things to Avoid Don t: Play us vs. them games Spring audit findings on management Take on special project requests which should be done by management Give information that is a difficult read (technicalities, volume)

48 CAE Tips Defuse personality conflicts and focus on the work Understand management s priorities Focus on what happened and how to fix it (rather than assessing blame) Don t let office location hurt your communications with management

49 CAE Tips When you make a mistake, admit it! Keep your promises Be aware of your limitations (avoid over promising and under delivering ) Avoid auditing and accounting jargon Avoid the infamous gotcha mentality

50 CAE Tips Things to Avoid Don t: Make decisions for management Take sides in a turf battle Focus on insignificant issues Project defensiveness when a manager takes exception Turn away a business partner

51 CAE Tips Things to Avoid Don t: Project arrogance Use your position power inappropriately Surprise the CEO or Committee Chair at Board/Audit Committees meetings Lose your integrity and reputation Lose your independence and objectivity

52 Johari Window

53 Johari Window Model of awareness and group dynamics Impact of disclosure and feedback Interpersonal communication and group development Joseph Luft and Harry Inghan (1955)

54 Johari Window Arena Unknown Façade Blind Spot

55 Johari Window THINGS I KNOW THINGS I DON T KNOW THINGS THEY KNOW ARENA THINGS THEY DON T KNOW ARENA Attitudes, behavior, motivation, values, way of life. Known to self and to others.

56 Johari Window THINGS I KNOW THINGS I DON T KNOW THINGS THEY KNOW ARENA THINGS THEY DON T KNOW UNKNOWN UNKNOWN Hidden complexities, subconscious. Neither the individual nor others are aware of certain behaviors or motives.

57 Johari Window THINGS I KNOW THINGS I DON T KNOW THINGS THEY KNOW ARENA THINGS THEY DON T KNOW FACADE UNKNOWN FAÇADE Hidden agenda, sensitivities, feelings, personal life, fears, relationships. Things we know but don t reveal to others.

58 Johari Window THINGS I KNOW THINGS I DON T KNOW THINGS THEY KNOW ARENA BLIND SPOT THINGS THEY DON T KNOW FACADE UNKNOWN BLIND SPOT Perceptions, prejudices, judgements. Others can see things of which we are unaware.

59 Johari Window THINGS I KNOW THINGS I DON T KNOW THINGS THEY KNOW ARENA BLIND SPOT THINGS THEY DON T KNOW FACADE UNKNOWN Increased disclosure and increased feedback = Improved communications

60 Johari Window THINGS I KNOW THINGS I DON T KNOW THINGS THEY KNOW ARENA BLIND SPOT THINGS THEY DON T KNOW FACADE UNKNOWN OBJECTIVE OF GROUP DYNAMICS: More open communications Increase ARENA Lessen FAÇADE, BLIND SPOT, and UNKNOWN

61 Johari Window More Information Luft, Joseph Group Processes: An Introduction to Group Dynamics National Press Books, Palo Alto, California (1970, 2 nd edition)

62 Personal Development Plans So what does today s topic mean to you? What can you do to enhance the quality and effectiveness of interpersonal, communication and facilitation skills? Complete a personal development plan Discuss this with your CAE (or Department Chair) within the next 10 work days

63 Personal Development Plan What can you do to enhance the quality and effectiveness of interpersonal, communication and facilitation skills with: Students/ Faculty? Fellow staff members? the CAE / Audit Director? Executive and Line Management? External Auditors? Fellow Audit Professionals?

64 Coordination An act reluctantly entered into by two or more partially consenting bodies. -- Fred Allen

65 Old Story Everybody Somebody Anybody Nobody

66 Stop acting like auditors Start acting like humans. Questions?

67 Steve Goodson CIA, CGAP, CCSA, CISA, CRMA, CLEA