According to the International Standards for the Professional Practice of Internal Auditing (STANDARDS), internal auditors perform assurance services, defined as an objective examination of evidence to provide an independent assessment on governance, risk management, and control processes for the organization. Examples may include financial, performance, compliance, system security, and due diligence engagements. Internal audit plays a critical role in financial management and governance.
Financial Management executives such as the Chief Financial Officer (CFO), Controller, Chief Audit Executives (CAE), Chief Control Officer, etc., are working under intense pressure to address the competing priorities from internal and external stakeholders. As customers and clients demands increase and evolve, every organization faces pressure to stay ahead of the curve or not lag too far behind. Failure to meet customer needs and deliver services and products to meet their expectations could mean the end of any business.
More than ever, financial management executives must now serve as crucial stakeholders managing disruptions and transformations within their organizations such as challenging the status-quo, fostering innovation, increasing the use of technology, etc. Financial management executives must also manage the external threats and evolving risks impacting their organizations, stay-on-top of regulatory changes and expectations, manage pressure from shareholders to reduce costs and increase profits, and manage the impact of disruptors. Internal audit must understand how the CFO role within their organizations is evolving, and what additional changes are required to continuously improve accounting, financial reporting, audit, and governance initiatives. The risk of financial reporting errors and misstatements, fraud, waste and abuse increase as financial management executives struggle to balance competing and often conflicting internal and external expectations.
How can internal audit assist management to collaborate with stakeholders throughout an organization and continuously improve accounting, financial reporting, audit, and governance initiatives?
First, it is essential for internal audit to apply standards using a modernized approach to performing tasks while adapting to the dynamic business environment. Second, internal audit solutions to assist management should go beyond the traditional limits of financial reporting and accounting policies, procedures and internal controls. The internal audit charter must be updated and used as a guide executing internal audit tasks.
For this to happen, the business-as-usual and traditional mindset within the internal audit function needs to change. If management and the CFO function are moving the organization in the right direction at a fast pace, internal audit cannot afford to lag if it’s going to create value by improving accounting, financial reporting, audit, and governance initiatives. For internal audit to improve financial management and governance, the Chief Audit Executive (CAE) should develop and implement a framework to monitor and evaluate the following continuously:
- Align enterprise-wide mission, goals, and objectives with operations and strategy;
- Understand the macro and micro risks impacting the organization;
- Identify opportunities for operational improvements;
- Evaluate the quality and compliance effectiveness; and
- Assess critical systems and technologies (risks and vulnerabilities) used by departments within the organization.
In the Institute of Internal Auditors’ Internal Auditor publication, “Optimizing Internal Audit,” that summarized the Synergy internal audit support methodology, we stressed that internal audit should leverage its knowledge of the organization’s strategic alignment, customer needs, mission, risks, compliance requirements, and operations to collaborate with functional managers including the CFO to improve financial management and governance.
Synergy Integration Advisors provides the following services to assist management in collaboration with stakeholders throughout an organization to continuously improve accounting, financial management, audit and governance initiatives:
- Establish a framework to validate the existence of an appropriate Entity-Level-Controls (ELC’s) tone and culture.
- Assess Internal Controls: Perform risk assessment and testing of the design and effectiveness of key financial management internal controls.
- Perform risk and fraud vulnerability assessments.
- Establish a process to continuously monitor, test and improve financial management processes and systems (business transformation and process improvements).
- Develop a framework to appropriately and timely remediate findings including assistance implementing suitable financial management controls and provide training for management, staff, and stakeholders.
- Establish a process to perform Risks and Controls Self Assessments (RCSA’s) for moderate and low risks processes and controls.
- Monitor and address financial reporting and accounting regulatory changes to ensure ongoing compliance and facilitate training to staff and stakeholders.
- Develop appropriate accounting and financial management Key Performance Indicators (KPI’s) and metrics including the use of appropriate visualization tools.