TFL Vsebine / TFLGlasnik

1. INTRODUCTION

Like all professions, internal audit has changed since its early days. It is continuing to evolve as we begin to ease into the volatile and uncertain post-pandemic world in europe and elsewhere. But what the internal auditor of the future will be, no one is quite sure. What will be the key requirements of the role and what will every internal auditor need to know, be and have access to in their internal audit toolkit? Will there even be a ‘human’ internal auditor or will apps, scripts and continuous monitoring replace us all? Or robots, with robotic process automation for the activity a physical robot won’t even need to do? While there is considerable uncertainty in all of this, what is more certain, is that the internal auditor of the future will certainly face a world of challenges and opportunities like never before.

In this article we will be focusing on the key knowledge, skills, experience and characteristics that the internal auditor of the (near) future will need.¹ We present our thoughts and opinion, therefore this article is a bit less scientific. Nevertheless we will present qualities that internal auditor needs today, and some have been necessary since the dawn of the profession. others are more recent ‘new kids on the block’, or more innovative in nature, or are accelerating trends or specialisms that will have to be mainstreamed in the near future.

The structure of our article is the following. First, we present the historically dominant view of an internal auditor. This is followed by our idea of a future internal auditor, including a brief Mckinsey’s seven-s Model overview. in the end, we briefly conclude with the Fourteen-C Model.

2. VIEW OF THE INTERNAL AUDITOR IN THE PAST

Views of the internal auditor in the past are numerous. From our own experience, we present the following. The inspector. The police. The inquisitor. The faultfinder. The pedantic bureaucrat looking down on first- and second-line teams from an ivory tower. A superficial amateur who gets in our way works retrospectively – with the wonderful power of hindsight of course – and ultimately stops us from being successful. An energy vampire that drains the life, fun, enthusiasm and agility out of anyone or anything that crosses their path. or even, a grim reaper-like figure who dispatches or bayonets the wounded on the battlefield of organisational day-to-day life (and death). These characters of an internal auditor are also portrayed in cartoon-like internal audit caricatures (see Figure 1).

Figure 1: Graphical presentation of the view of the internal auditor in the past

3. Predicting the internal auditor of the future is tough

We are of an opinion that the days of the nit-picking internal auditor are well and truly numbered, even without that asteroid strike. These internal auditors have been on the way out for a long time, gradually being replaced by more professional, business improvement-focused internal auditors who know the importance of positive relations, effective communications, adding value and a desire to help their clients – and their organisation – be more successful. In our experience, internal auditors have become much more warm- blooded, even human on occasion, and certainly more people-focused and emotionally intelligent as time has gone by.

However, will the internal auditor of the future be more like these cuddly, more people-focused humans, or will we see a swing back in time to the epoch of the dinosaur internal auditor of the past? A few years’ time will tell.

4. WHAT DO OTHERS SAY ABOUT THE FUTURE OF WORK?

As well as our professional bodies, there are plenty of internal audit bloggers in the virtual world. We are all crystal ball-gazing to help us understand what the future can look like. There are many different views and opinions. some of the views are quite good and useful and interesting. Other organisations, particularly in the professional services and consultancy worlds, regularly publish think pieces, surveys and the occasional real thought leadership on this subject.

One report we recommend is the World economic Forum’s “Future of Jobs Report 2020” (published in october 2020; WEF, 2020).² The Report identified ten skills that the World economic Forum believes will become crucial by 2025. It divides these into four categories: “problem-solving”, “self-management”, “working with people”, and “technology use and development”. Four of the five at the top of the list fall into the problem-solving category – “analytical thinking and innovation”, “complex problem solving”, “critical thinking and analysis” and “creativity, originality and initiative”. In our opinion, these all look like useful current and future internal audit qualities and skills.

5. THE MCKINSEY SEVEN-S MODEL

Before we present anything else about the internal auditor of the future and their knowledge, skills, experience and characteristics, we want to remind the reader of one of our favourite management tools and frameworks, the Mckinsey seven-s model (see Figure 2). The Model has been around since the 1980s but remains useful.

Figure 2: The McKinsey Seven-S model

Source: Jurevicius (2022).

The Mckinsey seven-s model is often used as a strategic planning tool by organisations to show how each of the seven diverse and distinct different elements are closely interrelated and critically important. If management makes changes to one element, such as the organisation’s strategy, it will require them to think through the implications for the other six elements or run the risk of the change (spectacularly) failing. Each element should be properly considered if we want to maximise the chance of success.³

We have used this model with several internal audit engagements over the years, assurance and advisory work. We will use the Mckinsey seven-s model to help us identify what the internal auditor of the future will be like, as well as the knowledge, skills, experience, qualities and characteristics one will need to prove successful. Internal auditor’s transformation will be evolutionary, rather than revolutionary.

5.1. Strategy

The internal auditor of the future will need to be comfortable operating at a strategic-level in the organisation, thinking strategically and adding value to strategy and strategy discussions.

To do this effectively, we believe that the internal auditor of the future must:

• Be sought out by seniors who matter – the movers, shakers and leaders. To do this, we will have to be more visible, more influential, more listened to and more valued.
• Focus on what (really) matters – whether it’s governance, risk and compliance developments, the rapidly evolving environmental, social, and governance (ESG) landscape, technology, cyber or the need for improved diversity, equity, and inclusion (DE&I).
• Understand, really understand – the organisational context, direction and challenges.
• Horizon scan more frequently, considering emerging risks and what is coming along over the next few years.
• Earn that seat at the top table in an organisation and then be welcomed back to it through the value and usefulness of their insight, voice, wisdom and skills.

Ultimately, the internal auditor of the future must be confident and comfortable in operating at the strategic and strategy-level in their organisation. In our opinion, many good internal audit teams and individual internal auditors are already operating at the top level but far too many do not.

5.2. Structure

The internal auditor of the future will need to clearly understand their organisation, its hierarchy, accountability, delegation and reporting lines. They will have to get how the organisation’s strategy informs these structure(s), together with the associated risks and controls resulting from the selected organisational model.

To do this effectively, we believe that the internal auditor of the future must:

• Understand the organisation they work for, its history, context, current design and strategy. be visible and active – in, across and throughout the organisation to truly understand it.
• Recognise and stand up for structural change – when it is needed to better align activity, accountability and authorisations with strategy.
• Contemplate – and critically evaluate – the implications of structural change(s).
• Add value in both ‘business as usual’ and organisational design ‘transformation’ situations.
• Be aware and astute, understanding how formal and informal accountability works in practice.

The internal auditor of the future must be a change advocate in recognising when accountability, delegation and reporting structures need enhancement, or when thinking through the implications of management- inspired changes to these areas. In our opinion, many good internal audit teams, and individual internal auditors do this nowadays but it is not as embedded across the internal audit profession as it needs to be.

5.3. Systems

The internal auditor of the future will need to be adept at assessing, analysing and evaluating key organisational systems, processes, activities and initiatives. The internal auditor will need to be proficient in identifying opportunities for more economic, efficient and effective post-pandemic, ‘brave new world’ ways of working in the hybrid environment we are moving into. Old ways of working may (have to) go the way of our dinosaur internal auditors, and risks, risk management and control environments will have to adapt or become obsolete.

To do this effectively, we believe that the internal auditor of the future must:

• Be able to professionally analyse and understand the key elements of digital, hybrid and human-based systems, and the implications for delivery, governance, risk and control.
• Be analytical, methodical and logical in process mapping, refinement and improvement.
• In contrast, be creative, insightful, decisive and speedy of thought to audit, as Richard Chambers (Former Ceo, the institute of internal Auditors) put it, at the speed of risk.
• Be data-driven and data-literate;
• A veritable internal audit data analyst, capable of using modern information technology to drive and inform internal audit engagements.⁴
• Also be a root cause analyst, to quickly get to the bottom of the problem, issue or situation, and not be fooled into addressing symptoms rather than underlying causes. The internal auditor must apply this in every aspect of work.
• Be capable and competent to select – and then successfully employ – from an increasingly diverse set of tools and techniques from an ever-expanding internal audit toolbox, without calling upon other subject matter experts every five minutes.

Ultimately, the internal auditor of the future must be creative and a critical thinker, capable of professionally analysing, assessing, establishing or changing systems at pace in a world that won’t wait three months for the result of a traditional assurance or consulting engagement to complete. Our thought is that many internal auditors are both of these nowadays but a greater number may well be needed in the future, as the challenges and speed of risk are only likely to increase.

5.4. Styles

The internal auditor of the future will need to understand their organisation’s leadership and management style(s) and approach. They will have to understand how to work as effectively as possible with key stakeholders, whatever their styles, to deliver the best results for the organisation, in an appropriate, ethical and professional manner.

To do this effectively, we believe that the internal auditor of the future must:

• Become an internal audit ambassador, able to engage smoothly and effectively with leaders and managers, whatever their own style and nature, to promote the service and to champion its work.
• Show tact and diplomacy, knowing when to remain quiet, when to urge caution, when to be firm, when to be discrete and when to call things out loudly and clearly for necessary action to be taken.
• Be an influencer⁵ and energiser for governance, risk and control improvement in a way. or ways, that compel management to pay attention and – where necessary – act.
• Demonstrate empathy and fairness in all their dealings with management. Management does (usually!) have a tough job to do and countless urgent priorities. often more than an internal audit. Never expect more from management than we expect of ourselves as internal auditors. internal auditors should take a look at each recommendation they make: does the internal audit team do what internal auditors are recommending that management do?
• Support management to get the best out of the internal audit. some managers will still have the scars from the battle with the internal auditor "from hell in the Jurassic period", and will be nervous in their dealings with internal auditors. internal auditors must coach them to feel the internal audit love.
• Be that professional and trusted adviser or critical friend that we’ve been talking about being for so long. but we will need to make this real.

Ultimately, the internal auditor of the future must be both a coach and challenger to management. Coaching when that may help deliver the best outcome and challenging when that is necessary too. The internal auditor of the future must be comfortable playing both roles, confident in doing so and should not avoid having difficult conversations when they are required. Too many internal auditors shy away from one or both of these roles.

Celoten članek je dostopen za naročnike!