control, and governance
control, and governance
Back to Basics
Journey to the Cutting Edge
Innovative internal audit practice is a road, not a destination.
JEFFREY RIDLEY, CIA
Internal auditors just starting in the profession face a learning curve that includes grasping the principles of auditing and understanding how those principles are embedded in traditional audit processes. Applying this knowledge in practice requires imaginative thinking about the organization’s operations, objectives, and vision, as well as its past, present, and future. Part of this process involves a commitment to innovate — to continuously look for better ways to audit and deliver high-quality service.
Internal auditing, by its very nature, provides many opportunities for innovation in the services it provides. The profession’s emphasis on analytical and problem-solving processes encourages critical thinking and creativity. Typically, internal auditors improve traditional audit processes by using their existing knowledge and skills to seek better practices. Such improvements often come from necessity and imagination as well as from performance benchmarking efforts inside and outside the organization.
Whatever the processes of innovation and improvement, the auditor’s goals should always be the same: to provide better services, improve efficiency, achieve greater customer satisfaction, remain at the forefront of change in professional practice, and increase personal satisfaction. Goals such as these factor into all quality programs and are recommended in all principles on which quality products and services are created. Achieving quality means functioning at the leading, if not cutting, edge of practice. Maintaining that edge is essential for the promotion of all internal audit services in the organization, requiring a commitment to continuously improve through use of innovative practices.
CUTTING EDGE DEFINED
The Oxford English Dictionary defines cutting edge as “the latest or most advanced stage; the forefront ...” in its noun form and as “innovative; pioneering” when used as an adjective. Cutting edge applies to internal auditing in both respects. The term is used to describe different activities — from strategy to operations — with outputs that include both products and services. It has many synonyms, including progressive, advanced, forward-looking, radical, and even revolutionary, as well as leading edge and best practice.
Whatever the definition, cutting edge denotes innovation and the imagination needed to achieve it. Imagination, in fact, is the key to internal audit excellence, regardless of whether the auditor provides assurance, consulting, teaching, or facilitation services. Moreover, cutting edge internal auditing comprises the adventure, challenges, opportunities, and risks that exploration produces. It pioneers new ideas to improve not just one internal audit activity but many, leading to significant value for audit functions, organizations, and the profession as a whole.
BEYOND TRADITIONAL PRACTICE
| Reflecting on Current Practice Audit innovation typically begins with an assessment of existing practice. Internal auditors can use several questions as a starting point for reflection on their current approach to auditing.
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Practices identified as cutting edge today may well be considered traditional tomorrow, or they may remain cutting edge for some time. There is no better evidence of this than in technology. The desktop computer, for example, was considered cutting edge technology when introduced in business during the 1960s. For some it is still cutting edge, but for many it is now considered a traditional tool — hardware found in all types of businesses and many homes. Yet cutting edge devices continuously change their software and accessories, and this practice will continue. Today, traditional desktop hardware is being replaced or augmented by cutting edge technology in the form of wireless laptops, handheld devices, and other mobile technologies. As technology progresses, more cutting edge developments will be introduced, and their rate of introduction will increase.
Remaining on the cutting edge also involves understanding customer needs. Imagination can play an important role in this process and is essential to developing internal auditing’s overall strategy, policies, processes, and communication style. In The Practice of Modern Internal Auditing (1973), author Lawrence Sawyer recognized this precept with his recommendations for internal auditors to be helpful, understanding, open-minded, and empathetic in their work and to adopt effective problem-solving and listening skills. All of these characteristics encourage imagination. In subsequent writings Sawyer promoted the need for creativity to improve problem-solving activities — creativity stemming from a discontent with what is, driving what should be.
A COMMITMENT TO IMPROVE
In Enhancing Internal Auditing Through Innovative Practices (1996), authors Glen and Maryann Gray recognized many challenges facing internal auditing at the time, including technological change, staffing needs, changing organizational structures, expanding scope of services, competition, and globalization. Each of these challenges requires changes to internal audit activities and traditional audit processes, as well as innovation.
The researchers’ analysis of case studies shows common goals for audit innovation that are still relevant today: quality, efficiency, value added, staff skills, performance, and morale. Internal auditors should always aspire to achieve these goals in the services they provide. They must start with audit planning, given that this process develops and is promoted at board and engagement levels. Innovation must be reflected in supporting documentation, risk assessments, testing, verification, results, communications, recommendations, and follow-up processes. A commitment to innovation should be marketed as an important value added.
PROGRESS THROUGH INNOVATION
Since it was founded, The IIA and its members have been at the forefront of innovative internal audit practices. The Institute’s vision and mission statements promote best practices in the services internal auditors provide, and these efforts encourage innovation throughout the profession. The Institute’s International Professional Practices Framework, for example, provides a means for innovation using its internal audit attributes and performance guidance. As an internal auditor’s understanding of the framework increases, many doors to best practice open.
The IIA’s Quality Assessment Manual, Fifth Edition (2006), lists examples of best practices developed from many commitments to improve. All of these practices are reflected in today’s audit literature and in the syllabi for internal audit certification programs. Internal auditors should be aware of these best practices, as each one offers opportunities for auditors to use cutting edge resources and techniques that add more value for the profession and the organizations it serves.
Best practice lists, however, are never complete — there will always be other practices to add, and every internal auditor has an opportunity to do so. Established audit processes will always invite innovation and cutting edge developments. Best practice internal auditing owes a significant debt to those who have explored in the past and are exploring today to continually improve and develop audit professionalism. All internal auditors should embrace this tradition and see exploration, adventure, challenges, opportunities, and risks in all their traditional audit processes, adding to the collective knowledge base that has made our profession truly cutting edge.
Jeffrey Ridley, CIA, is a visiting professor of auditing at Birmingham City University in England and author of Cutting Edge Internal Auditing (2008).
To comment on this article, e-mail the author at jeffrey.ridley@theiia.org.
