Assess Our Relevance

August 2011

The IIA’s new chairman of the board, Denny Beran, CIA, CCSA, CPA, CFE, says internal auditors must candidly self-assess their ability to deliver relevant and impactful work products in the aftermath of the global financial crisis.

Leaders of the wagon trains that carried early Americansettlers in search of fertile farm and grazing land, such as the plain that 150 or so years later would become the bustling suburban Dallas headquarters site of J.C. Penney Co. Inc., customarily tapped their most trustworthy and savvy men for scout duty. Those skilled scouts added great value to the expedition by exploring the planned route ahead of the main convoy and reporting the potential dangers that lurked over the next hill, around the next bend, and across the next river. This risk management activity of sorts enabled the wagon masters, in turn, to traverse the safest, surest possible course westward. Capable scouts were highly valued and sought after until railroads rendered them obsolete near the end of the 19th century.

This historical lore comes to mind as I celebrate my 40th year as an internal auditor for jcpenney in the Lone Star State of Texas and begin my term as Chairman of the Board of The IIA. It strikes me that in the aftermath of the global financial crisis of 2008 and the ensuing recession, the business wagon masters of our time — C-level executives and members of boards of directors and other governing bodies — need, and indeed expect, today’s internal auditors to perform a contemporary version of scout duty.

Most executives and directors of organizations outside of the financial services industry almost surely did not have sufficient information at hand to envision in the heady financial boom days of 2007 that risky subprime mortgage-lending practices and collapsing real-estate prices would soon trigger a chain of dire financial events that ultimately would devastate the global economy. These stakeholders of our profession are understandably nervous now that other low probability/high impact “black swan” events might be looming around the inevitable bends of the business trail ahead. They also are unsure about the safety and soundness of their organization’s strategies and operating plans for renewing financial growth. It’s my belief that internal auditors who do not yet have the knowledge and skills to make and effectively communicate these and other relevant and impactful assessments for their stakeholders could well become as obsolete over time as their frontier scout forerunners. It should not be surprising, therefore, that our chairman’s theme for 2011–2012 is a challenge and rallying cry for every member of our profession worldwide — Assess Our Relevance!

A RELEVANCE SELF-ASSESSMENT

Relevant internal auditors are regarded by their stakeholders as indispensable assets and as professionals who are tirelessly committed to helping the organization achieve its goals by providing independent, objective, and candid audits stemming from insightful, dynamic assessments of risk. I urge all internal auditors to mitigate their risk of obsolescence by moving quickly to self-assess how they measure up against this relevance yardstick. One way to do this is by asking and forthrightly answering these and other tough questions:

Have you proactively built stakeholder relationships based on mutual trust and respect? Once built, are you nurturing those relationships with ongoing communications that are frank and open in nature? Are you showcasing your independence and objectivity by maintaining unwavering integrity and accountability?
Have you overcome stakeholder resistance to giving you a “seat at the table” where key business decisions are made and where the organization’s culture and tone at the top are forged? Are you regarded as a valued member of the leadership team, and therefore do you have the ability to influence strategic and operational changes while still fiercely protecting your independence?
Are you sufficiently connected to the organization’s key strategies and initiatives to plan and successfully conduct risk-based audits that yield reliable insights, analyses, and assessments that management can leverage to improve business outcomes? Are you issuing your opinions and recommendations timely enough that management can implement them cost-effectively?
Are you widely viewed within the organization as a governance, risk, and control expert, a willing go-to person for advice on these subjects?
Have you embraced technology as an enabler and a competitive advantage for the internal audit function, and have you, yourself, become a data analysis wizard?
Are you a persistent and consistent advocate within the organization and elsewhere for the value of our dynamic profession to society in general, and to business in particular?

I encourage all internal auditors to develop without delay a formal plan for remedying the relevance shortcomings revealed by their rigorous self-assessment and to hold themselves accountable for its timely completion. Auditors generally are comfortable with asking management to undertake action plans for improvement, and so why not demand this of ourselves?

Throughout my year as IIA chairman, I will encourage internal auditors everywhere to keep assessing, improving, and maintaining their relevance in part by continually striving to practice in full compliance with The Institute’s International Professional Practices Framework, which comprises the very definition of our profession, the internal audit Code of Ethics, the International Standards for the Professional Practice of Internal Auditing, and highly recommended guidance such as practice advisories, position papers, and practice guides. I will especially encourage them to comply with the 1300 series of standards, which require CAEs to develop and maintain a comprehensive internal audit quality assurance and improvement program that includes a quality assessment by a qualified external reviewer at least once every five years.

I also will encourage them to demonstrate a high level of internal audit competency by achieving the profession’s flagship Certified Internal Auditor (CIA) designation and perhaps additional professional credentials such as the Certification in Control Self-Assessment, Certified Financial Services Auditor, and Certified Government Auditing Professional. And I will vigorously recommend that they keep investing not just their organization’s but also their own time and financial resources in developing and enhancing their technical knowledge and skills, because learning is a never-ending journey for
our profession.

The great news in my view is that the internal auditors I have had the pleasure to meet in previous roles as an IIA global volunteer will be highly receptive to these urgent calls to action. The majority who heed them and take appropriate follow-up action to heighten their professionalism will grow in stature and enhance their role in the organization over time. Conversely, the minority who choose to maintain the status quo will become increasingly irrelevant to their stakeholders, and their standing and role will diminish correspondingly in the years ahead.

KEEPING THE IIA RELEVANT

The IIA is in the midst of celebrating its 70th anniversary of adding value to internal audit professionals with organizations of all types worldwide. However, The Institute’s current volunteer leaders and professional staff are not succumbing to the temptation of complacency. Instead, we are working diligently to maintain the organization’s global support for our evolving profession and its stakeholders by achieving several key strategic goals that, although established before the onset of the financial crisis, remain vitally important — and highly relevant.

More specifically, this strategic plan aims to achieve six milestones toward fulfilling The IIA’s long-term vision and mission and maintaining its relevance to members. These lofty milestones are, in summary, establishing universal recognition of internal auditing as a profession; defining the principles of the profession and assuring they are available seamlessly worldwide; assuring adherence to professional requirements; serving as the preferred provider in the research, development, and dissemination of knowledge to advance the profession; being seen by members, and operating, as one global organization; and ensuring the long-term financial viability of the organization.

During the next year, IIA volunteer leaders and staff will systematically and rigorously assess whether The Institute’s current initiatives and programs that are grounded in the strategic plan are of sufficient quality and relevance to its 170,000 members in 165 countries. The ambitious goal of this review is to ensure that The IIA is offering practitioners a best in class:

International Professional Practices Framework that is recognized, trusted, valued, and endorsed by key stakeholder organizations around the world.
Certification program that is sufficiently rigorous to provide internal auditing’s stakeholders with assurance that CIAs are highly qualified professionals who possess the knowledge and skills needed to perform impactful and relevant value-added audits.
Research process that produces educational products that can enable practitioners to become highly knowledgeable about key trends and emerging issues.
Learning strategy that facilitates the development and maintenance of internal audit and general business skills.
“Progress Through Sharing” strategy that enables members worldwide to share their leading-edge internal audit practices in person and via the Web.
Advocacy strategy that facilitates the development of meaningful relationships with global regulators, standards setters, and professional associations that represent internal auditing’s key stakeholders.
Academic relations strategy that creates awareness of our profession among educators and the students who will comprise the next generation of internal auditors.
Communication strategy that ensures all IIA members know about the valuable information that is available from The Institute to help them become better at what they do.
Financial strategy that ensures the sustainability of The IIA globally for the next 70 years.

During the coming 12 months, I commit to gathering feedback on these topics from members and leaders of the many North American chapters and IIA institutes around the globe I plan to visit. I want to learn more about what we as individual internal auditors and The IIA as our global voice can do together to make our profession more universally recognized, trusted, and valued by our organizations.

MODERN-DAY SCOUTS

I feel privileged and honored to serve as The IIA’s chairman at a time when our profession’s stakeholders, like their wagon master predecessors of the 1850s, are struggling to find the safest and surest road to prosperity for those they serve, because I believe this difficult struggle provides internal auditors with an opportunity to perform an invaluable 21st century version of scout duty. I invite every internal auditor around the world to join me during the coming year in helping ensure the success of their stakeholders and the overall organization by embracing our theme: Assess Our Relevance.

An Enduring Commitment to Service

During my travels in various IIA leadership capacities in years past, internal auditors have often expressed curiosity about my professional and volunteer careers, which admittedly are out of the ordinary by today’s standards. After all, in an era when U.S. government statistics tell us that the median number of years an employee will hold any given job is 4.1 and the average number of lifetime careers is five to seven, I have worked at J.C. Penney Co. Inc. as an internal auditor for four decades and have been active in my professional association for more than 35 years. An eclectic group of tremendous people — my parents, J.C. Penney, John F. Kennedy, and my first chief audit executive Chuck Brown — are primarily responsible for my commitment to enduring service, each in his or her own way.

When I was growing up in suburban Pittsburgh, my parents often extolled the importance of high-minded personal traits such as honor, integrity, teamwork, and confidence. When I embarked on my first job search, my mother and father counseled me across the dinner table to choose an employer with a demonstrated commitment to similar values. The more I learned about the principles on which J.C. Penney founded his business in 1902, the more certain I became that this was the right organization for me. And because I have observed jcpenney’s senior management and board walk that talk over the years, the idea of leaving this great organization has never crossed my mind.

Similarly, I recall listening intently to President Kennedy’s inaugural address when I was in the sixth grade. I most vividly recollect embracing the spirit of his still-relevant exhortation, “Ask not what your country can do for you, ask what you can do for your country.” When Chuck Brown encouraged me to get involved in The IIA and embrace The Institute’s motto of “Progress Through Sharing” in the late 1970s, I heeded his call to service and remain committed to it to this day. I was privileged to sit for the first offering of the Certified Internal Auditor (CIA) exam in 1974, and this year I had the profound honor of awarding the 100,000th CIA certificate. I don’t know who was more excited, the person receiving the certificate or the person handing it out, because I so fervently believe in the CIA program.

I encourage all internal auditors to renew their commitment to the stakeholders they serve and to their professional association. I assure you, from decades of personal experience, that you will gain much more professionally and personally from this service than you give.

To comment on this article, email the author at denny.beran@theiia.org.

Assess Our Relevance
Indeed, Internal Auditors all over the world need to demonstrate that they add value to the organisations they work with/in, otherwise their relevance will soon be questioned. Internal Auditors should not rely on legislative requirements for their continued relevance as changes in legislative requirements may render them redundant.
Posted By: Bongani Mbewu
2011-08-09 8:28 PM

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