The changing role of the internal auditor by hemadharma

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Changing Role of IA

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									The changing role of the internal auditor
R.Dharmarajan

Internal Audit and Business Risk Malaysia, Nov 99

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Outline of talk
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A changing world - the business context The new emphasis on value added The auditor as consultant Potential conflicts of interest The importance of communication Challenging traditional beliefs

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The changing world
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New trend to compare with world class organisations, not best in own class New thinking on risk management New thinking on general management

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Changing paradigms
Old mind set
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stability security national orientation technology driven hierarchical organisation separate work functions autocratic leadership

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Changing paradigms
Old mind set
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New mind set
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stability security national orientation technology driven hierarchical organisation separate work functions autocratic leadership

continuous change employability global orientation customer driven networking organisation cross-functional teams authoritative/inspirational leadership

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Characteristics of world class
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Usually focused on one business Externally oriented Shared vision and strong culture Empowered workforce

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Constant innovation
Upbeat morale Learning culture Superior customer satisfaction Superior financial health

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Where Does Audit Fit In?
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Essential element in the corporate risk management system Provision of assurance and advice on:
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management of the change process management of discontinuities (including early warning) operation of high risk business as usual high level governance processes

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Changing internal audit

All Risk

Financial Risk
Policeman Consultant

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Changing internal audit
•Agreed risks •Partnership approach •Technical expertise

All Risk

Financial Risk

•Own universe of risks •Tell management •Know better

Policeman

Consultant

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Characteristics of World Class Audit
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Deep understanding and technical knowledge of the organisation’s activities Ability to think both at the strategic and detailed levels Broad experience and perspective of business Ability to engage clients effectively

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World class audit (2)
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High credibility with Management

Trusted by and the confidante of Management
Ability to deliver high quality solutions to business problems

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Clear recognition of limits of competence ability to work with other world class experts to deliver the full service

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The new IIA definition
Internal audit is an independent, objective, assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve effectiveness of risk management, control, and governance processes.

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Redefined Role of Internal Audit
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Provision of assurance on the Group’s risk management systems Provision of help to Management to improve risk management systems Incident investigation Consolidated risk reporting systems Risk and control consultancy Review and advice on high level governance processes

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Challenging traditional beliefs
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Independence is out, value adding is in!

Know what you are talking about
We recognise the limits of our knowledge and competence

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We are not policemen!
We work with management

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We report positively, not by exception

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Some line reaction
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“You want to be another surgeon round the body! Well join Finance, HR, Strategic Planning, Internal Control, Risk Management.... Who will do the business?” “If I want a consultant I will get one myself” “Where is this value going to come from?” “I can tell you the things I’m doing right now they’re not finished. If I was worried about any of the rest I would be dealing with it.” “I want a policeman”

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Some approaches to selling audit
What keeps you awake at night ?
 What are the key figures you look at each
month?

We’re from Head Office. We’re here to help
you!

 You are not worried about …..What is the
source of your assurance?

 Do you feel in control of everything going on in
your area?

You need a workshop!

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Barriers
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Technical competence

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Knowledge of best practice operations
Soft skills Line expectations Use of technology Quality of people

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Overcoming the barriers
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Clearly define your own areas of competence

Ensure you have the right people
Upgrade technology Buy-in knowledge and technical specialisms on ad-hoc basis Define quality requirements for world class delivery Define your customer value proposition Emphasise importance of soft skills

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Values we work to
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We create shareholder value by working in partnership with our customers We bring a further degree of objectivity to the assessment of risk and control There is no such thing as "an audit point". There are only business issues to be managed by line management. We offer solutions, we do not just raise problems. We need to be experts and problem solvers.

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We add value by providing assurance; delivering efficiency improvements; facilitating communications; providing cost effective alternatives to external consultants

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Values continued
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We do not measure our performance by the number or significance of points raised.

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We understand that a certain level of commercial risk may be accepted by management.
We believe an objective approach is essential to our work, the ultimate guarantee of which is our professional competence and integrity We emphasise the benefits of "control" meaning being "in control” We follow up significant matters promptly and report to the appropriate level of management

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Communication
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Keep it positive

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Learn from the marketeers and salesmen
The “logical” approach is almost always wrong!!

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Conclusions
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As with business generally, internal audit needs to run to stand still New emphasis on value added by internal audit

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First class consultancy service is the answer to the independence question


								
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