A high-powered auditor: proficiency in traditional areas of professional competency is not always enough to deliver a value-added effort

Internal Auditor, Feb, 2005 by Lal Balkaran

INTERNAL AUDITING HAS come under the spotlight in recent years, following the series of corporate meltdowns in the United States and other parts of the globe. Indeed, internal auditors worldwide are gaining increased recognition for their work, and the profession is seen by more and more stakeholders as a key pillar in the governance process. In many ways, it has never been so good to be an internal auditor. But it is also more important than ever that auditors deliver a value-added effort, thereby living up to the heightened status auditing has recently enjoyed.

A range of criteria exists for gauging an audit practitioner's effectiveness--certification, technical knowledge, compliance with established standards, and knowledge of the company and its industry are just some of the benchmarks commonly used. But beyond such measures, auditors need to consider a host of additional factors that transcend objective criteria and established guidelines. Such factors--including interpersonal aptitude, cultural awareness, and other "soft skills"--can add value to the internal audit effort and enable auditors to become truly high-powered professionals.

EXPLORE CULTURAL DIFFERENCES

In the current era of advanced communications and globalization, internal auditors must take the initiative to understand issues related to doing business beyond their own country's borders. Cultural differences, in particular, can affect the outcome of an audit and represent an important consideration on international engagements.

Cultures across the globe perceive audit characteristics such as independence, fieldwork, reporting, and follow-up quite differently. Moreover, accounting practices and financial reporting may differ from one culture to the next. For example, unlike Western economies, where efforts are often made to minimize taxes, many Islamic cultures consider paying zakat--money collected for those who are less fortunate--to be an important religious duty. The rules underlying zakat, however, are inconsistent with Generally Accepted Accounting Principles and can pose challenges for Western-trained auditors. Practitioners need to carefully consider such issues and incorporate an understanding of cross-cultural differences into their repertoire of audit skills.

HONE YOUR PEOPLE SKILLS

The ability to get along with employees throughout the organization, at both the management and nonmanagement levels, constitutes an essential soft skill. After all, working well alongside others can yield critical information during an audit. Effective listening, social, and communication skills help build trust between the internal audit department and its clients.

UNDERSTAND CORPORATE CULTURE

Corporate culture represents a system of shared values and beliefs that affect people, organizational structure, and systems. To ensure the engagement's scope and objectives are compatible with each client's unique environment, audit issues must be considered within the context of corporate culture. For example, suppose a company is committed to supporting local industry, and top management decides to buy manufacturing components from a nearby business for $35 each--even though these same items could be produced internally for $30. An uninformed internal auditor who produces an audit finding showing the potential $5 cost savings for each item is not adding value to the audit effort. The finding, though financially sound, would be out of sync with the company's corporate culture of community involvement and support.

LIVE BY EXAMPLE

All internal auditors should aspire to conduct themselves according to the ideals and principles they advocate to clients. Auditors should cultivate critical values such as honesty, ethical practice, and fairness, and behave in the workplace with these principles in mind. Practicing what you preach sends a message to clients, reinforcing the mission of the profession and extending its influence well beyond the scope of audit reports and consulting engagements.

PERSEVERE IN THE FACE OF ADVERSITY

If you smell a rat, follow your instincts to the very source. For example, former WorldCom chief audit executive Cynthia Cooper knew something was amiss when her department received obscure tips regarding the company's capitalization of certain line charges. Despite tremendous efforts by her boss (the chief financial officer) to prevent Cooper from doing her job, she persevered and eventually received clearance from the company's audit committee chair to review WorldCom's capital expenditures. Her diligent efforts revealed that expenditures were in breach of the company's capitalization policy and inconsistent with Generally Accepted Accounting Principles. The rest is history.

LEAVE YOUR MARK

Every engagement should be seen as an opportunity to effect improvement. The late Larry Sawyer, widely considered the father of modern internal auditing, once said, "Leave every place a little better than you found it." If your recommendations increase operational efficiency, you've certainly left the place and people better. The same applies if you find a fraud and corrective action is taken. Whenever you walk into a unit or department, always try to walk away leaving some improvement behind.