Few individuals understand the business better than a skilled and experienced internal auditor. Given their broad view of the organization and unique perspective, audit practitioners are often well-positioned to advise on the operating issues they discover, as well as contribute to strategic decision-making.
But internal audit's ability to add value in these areas hinges on far more than its skills, competencies, and experience. Key to the function's contributions is the individual practitioners' mind-set and approach to the audit process. Specifically, by keeping the needs of the enterprise in mind and adopting a leadership perspective, auditors can function in greater harmony with the business and ensure the relevance of the services they provide. Every practitioner, regardless of position within the audit department, would benefit from approaching their audit work from the viewpoint of leadership — in other words, by thinking like a leader.
The Right Mind-set
Traditionally, organizational leadership is defined by role, title, and span of control. But leadership can be, and often is, demonstrated at every level of the organization by individuals who think strategically about the business and act on what they perceive. Leadership, in essence, constitutes a behavior and a way of thinking, not a position. And because auditors function largely to serve the organization as a whole, this type of thinking is especially critical to the work they perform.
Adopting a leadership perspective starts with a deliberate shift in focus. That shift involves moving from an emphasis on merely carrying out tasks to seeing audit work in terms of a broader organizational picture. Attention to several areas, in particular, is crucial to transitioning toward this mode of thinking.
Clarity of Purpose An internal auditor operating from a leadership perspective will prepare and execute the audit, but will do so in the context of the larger business purpose to be served. In his book, Levers of Control, Robert Simons notes that internal controls are like the brakes on a car — they can be viewed as a means to stop the car when necessary, but confidence in a car's brakes actually means the driver can go very fast with assurance that he or she can adjust the vehicle's speed as necessary. An auditor who recognizes that controls are guardrails rather than speed bumps recognizes that, ultimately, the purpose of internal audit is to help the business thrive.
Values and Integrity Ethical behavior — fundamental truthfulness and honesty — is the starting point for leadership. Effective leaders value the importance of ethics in their decision-making and, in turn, set a tone for the rest of the organization. Internal auditors must demonstrate the same concern for maintaining company values and ethical standards, taking an entitywide view of the impact of their behavior. They need to maintain professionalism, objectivity, and candor at all times.
At the same time, auditors will have to work with the managers involved after the audit report is delivered and the results are discussed and addressed. So their work must be complete and accurate, pulling no punches, but the process must be managed in a way that preserves the working relationship.
Confidence and Courage In Leadership: The Inner Side of Greatness, Peter Koestenbaum notes that leaders must be willing to stay the course and remain true to their purpose and direction in the face of resistance. This is not opposition. It involves knowing what is at stake, realizing what is non-negotiable, and engaging with others to find a way for all to move forward despite conflicting opinions. Every auditor has found, or will eventually find, the need to maintain confidence and stick to audit findings that may be unfavorable. Again, the purpose is to help the business get better. So confidence also means moving past reporting information to offer business insight, with the confidence to suggest solutions.
A Path to Collaboration
When a coach told former professional basketball player Michael Jordan, "There is no 'i' in team," he responded, "But there is an 'i' in 'win.'" For a company to "win," each individual must put forth his or her best effort in collaboration with others to serve the purpose of the overall enterprise. Auditors who bring their best professional expertise to their work will more likely be seen as company leaders who happen to have a specialty in audit. Demonstrating this level of professionalism hinges on internal auditors' ability to:
- Identify key stakeholders — all impacted by internal audit's work and findings — and proactively build productive working relationships.
- Influence without authority by demonstrating partnership and mutual accountability, and being able to tell a compelling business story.
- Operate from a business perspective that clearly demonstrates an understanding of the company, the industry, and the challenges and choices facing company leadership.
- Build a personal career brand through authentic relationships and outstanding performance.
Auditors can enhance career prospects, and the audit function will likely be seen as a valuable company asset, when the members of the team demonstrate the skills and knowledge of the profession within a larger business and company perspective. Moreover, audit practitioners can further this effort by working to strengthen the company's controls and process while also building solid working relationships with the leadership team.
Setting the Tone
Audit leaders play an important part in helping the audit team function in a leadership capacity. They can lay the groundwork for the team and set a tone that helps cultivate this behavior. Three key activities, in particular, can help audit leaders foster the culture change and role evolution from execution to leadership.
- Defining the vision for the audit function, including its approach to control and compliance, generating business insight and improvement, and growing company leaders.
- Engaging the audit team at every level on discussions of how each person plays his or her role in the change process by helping to design solutions, demonstrating mutual accountability and support, and providing mentorship and coaching.
- Enabling team members to define their personal brand by seeing their contribution as more than just doing their job; bringing the best of who they are to what they do (values, goals, and strengths); establishing a leadership presence through professionalism and trust; and designing ways to build relationships and positively impact results and company reputation.
These outcomes can be achieved in any number of ways, including traditional off-site meetings and training designed to build skills and generate a commitment to new expectations. And while such activities can produce a great deal of energy and enthusiasm, it's essential that they not be seen as just another program, a fun retreat, or an opportunity to connect. Clear expectations for new ways of working with stakeholders in the business must be articulated, and plans put in place to recognize and reward those actions.
The energy and enthusiasm from an offsite or learning event must be leveraged by leadership follow-through, as the most senior members of the audit team continue to reinforce the lessons learned, monitor for behavior change and performance improvement, and lead the conversation in the company so that the team sees genuine commitment at every level. Leadership commitment is a prerequisite for this kind of change.
Leadership and Trust
Company leadership must be able to trust the audit function as a business partner. Each member of the team can establish that trust by developing a deep understanding of the business and the customer, demonstrating commitment to the company's purpose, and exhibiting the confidence and willingness to share reliable, accurate information about risk and company capability. Thinking like a leader requires auditors to see themselves as company leaders with a specialty in audit, rather than an as auditor who happens to work for the company.