Enough Celebrating - It's Time to Fill the Glass

Richard Chambers, CIA, CGAP, CCSA, shares his personal reflections and insights on the internal audit profession.

The past three years have been both remarkable and challenging for internal auditors. We have demonstrated remarkable agility in swiftly refocusing our efforts to address emerging risks in the wake of the global financial crisis. While resources have been reduced commensurate with corporate downsizing, the glass is arguably very much “half full.” As we move into 2011 and beyond, however, it will become imperative to “fill the glass.” Many internal audit stakeholders are once again growing restless in terms of internal auditing’s knowledge of the business, efficiency, and overall “value proposition.”

In my last blog entry of 2010, I reiterated once again how much internal auditors have accomplished in the past two years. I closed my thoughts, however, by sounding a “note of caution.” I noted that “storm clouds” may be gathering on the horizon, and that internal auditing’s stakeholders seem to be signaling a concern that internal auditors are often failing to demonstrate enough value. I sense an increasing mood that internal auditors are not adapting fast enough to dynamic change in their organizations. I also sense that the heavy emphasis on assurance over financial controls has stifled internal auditors’ knowledge of their companies’ business/industry.

In November, I participated in the Ernst & Young (E&Y) webcast: “Can Your Internal Audit Function Really Enable Business Performance?” During the broadcast, a number of sobering statistics were revealed from a recent E&Y global survey of internal auditing’s stakeholders:

  • 74 percent of respondents believe there is a need to improve their internal audit function.
  • 96 percent believe the improvements need to be made within the next 24 months.
  • Only 44 percent believe internal auditing helps their organization achieve its business objectives.
  • Only 37 percent involve internal auditing in key business decisions and strategy.
  • Only 32 percent believe their internal audit function attracts future leaders and high potential talent from within the business.

I also have noted similar trends in stakeholder views from my own observations and from other surveys. From my experience in this profession, I am not surprised that the stakeholders are getting restless. As I wrote in one of my first blogs almost two years ago:

“The most common strategic mistake chief audit executives (CAEs) make is failing to maintain continuous alignment with the needs and expectations of their key stakeholders (typically the audit committee, chief executive officer (CEO), and chief financial officer (CFO) in the corporate sector). Once a gap emerges, it’s only a matter of time before the audit committee and senior management collaborate to change CAEs.”

Based on the noise I am starting to hear from stakeholders, I have identified five key priorities I am recommending to every CAE as 2011 gets underway:

  • Assess key stakeholder expectations, identify gaps, and implement a comprehensive strategy for improvement.
  • Assess internal auditing’s contribution to risk management, and “step up to the plate” as needed.
  • Deploy a strategy for internal audit business knowledge acquisition.
  • Streamline internal audit processes and operations to enhance value.
  • Coordinate and align with other risk, control, and compliance functions.

I plan to elaborate on these key priorities in a series of upcoming blogs. In the meantime, I encourage you to share your thoughts on stakeholder expectations and effective strategies to identify and fill any gaps.


Posted on Jan 14, 2011 by Richard Chambers

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  1. Richard,

    Congratulations for the achievements in 2010 - but the bar remains high as we enter 2011. Your leadership is valued and will be critical if we are to make the progress necessary to meet our stakeholder needs.

    I am especially encouraged (as you would expect) by the second item on the list. While we have some great people and excellent talent driving our risk management work (in the areas of professional guidance, research, and training), this is an area that is new to many internal auditors. Few, even at the CAE level, have the kind of practical experience necessary to make the changes necessary - so our members are fully equipped to provide assurance and consulting services on governance and risk management.

    I strongly believe, and I think you share this view, that we need to bring experienced risk practitioners onto the various teams we have building out our risk management products and services. We can't do it alone, and should not.

    I am very optimistic for 2011. Great things will be achieved - but we need to move with alacrity.

  1. Hi Richard!

    A very timely article as there are indeed areas where internal auditing needs to have more breakthroughs, particularly in the government sector. Actually my reason for this email is to seek your opinion on the possible membership of audit committees in local government. 

    The Philippines is a country composed of provinces. As the US has states, my country has provinces. Each province has either cities or municipalities headed by elected public officials. I recently conducted an internal audit capability seminar for the Internal Audit Dept. of one province. But when it came to the independence aspect, the IAA reports functionally to the provincial governor, who is the highest official in the provincial government.   

    Much as they want to report to an Audit Committee, the set-up in local government does not allow that naturally and therefore they have no idea who could compose such a body. Thus I wrote to seek your opinion on this matter since in the US there is a governor for each state.   

    In the same manner, who can possibly compose the Audit Committees for Internal audit depts of the city government? Your help on this can provide a possible breakthrough in the IAA's independence in local government.

    Thanks and all the very best! 2011 Does provide a lot of promises and hopefully more breakthroughs.



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