As the business landscape shifts, audit committees, CEOs and CFOs are demanding more from their internal audit function than ever before, according to a new report from Korn/Ferry International and The Institute of Internal Auditor’s (IIA’s) Audit Executive Center. “License to Lead,” a recently released study based on insight from chief audit executives (CAEs) and audit committee members, indicates that today’s CAEs need broader experience, more business acumen and other key leadership skills to be effective in this dynamic economic environment.
According to the study, internal auditing is increasingly being perceived and utilized as a business function that can help save money, eliminate inefficient business practices and ameliorate risk. “You need systemic thinking, the ability to connect the dots and understand the implications and consequences of business decisions in order to utilize resources in the most effective way,” said Connie McDaniel, CAE at The Coca-Cola Company. Brian Worrell, CAE at GE, concurs. “You need to know what it’s like to run a business and make all the decisions and operational trade-offs leaders make every day.”
CAEs and audit committee members interviewed for the study also indicate that organisations operating in this challenging business climate increasingly require a CAE who takes ownership of identifying and understanding business risks. CAEs must also understand the importance of streamlining operations and maintaining adequate controls in the midst of a fragile global economy. Already steeped in risk identification, internal auditing is increasingly beneficial to strategic transformational initiatives, explained Kelly Barrett, CAE for The Home Depot. “I believe that audit committees are starting to see how big a role internal auditors can and should play in helping an organisation get it right on the front end—especially when an organisation is undergoing significant change.”
Communication Skills and Breadth of Experience
The “License to Lead” study emphasizes that given their critical role in providing insight to management and the board of directors, CAEs must be able to deliver a clear and concise message. Participants of the study indicate that today’s board expects CAEs to speak frankly and transparently, with a high degree of comfortable representing the facts and circumstances without concern about politics or personal perceptions.
Along with strong communication skills, today’s CAE must have exceptional technical skills, a strong grasp of risks and control and a deep understanding of how these risks impact the bottom line. Certification is still required in many organisations but more and more senior leaders are looking for broad experience that supplements those certificates.
Finding and retaining highly skilled talent for internal audit roles has not been an easy task over the past decade, according to “License to Lead.” The term “audit” scares away many talented young professionals who might otherwise have found the role enticing and rewarding, both in terms of professional growth and future career potential. A successful CAE can sell the value of the job to high-potential talent—and must do that in order to transform internal auditing.
“I think internal auditing is a great learning ground and we don’t do enough to promote the breadth of experience you get working there,” said Carman Lapointe, CAE of the International Fund for Agricultural Development based in Rome. Lapointe was recently appointed under-secretary-general for Internal Oversight Services (OIOS) at the United Nations.
Integrity, Ethics and Courage
Internal auditing has been heavily impacted by a decade that included financial and corporate turmoil. High-profile corporate scandals have put the CAE squarely in the spotlight on ethical corporate behavior. As a result, participants of the study said CAEs must demonstrate the utmost integrity as they work closely with the audit committee and management, while also maintaining the necessary independence.
If CAEs agree on anything, according to “License to Lead,” it is the need for courage under fire, particularly in the heightened risk environment that is impacting global organisations. In the face of tremendous pressures, CAEs must steadfastly do the right thing. “You must be a person who is willing to stand up alone, when things aren’t going right, and communicate the message in a timely fashion,” said New York Life's CAE Mark Arning.“ It takes someone who is willing to do the right thing for the company and put their own career on the side.”