What are the primary characteristics of a high-performing audit function?
Carawan Our profession has gone through a major transformation over the last decade. The nature of risk is increasingly global and interconnected, which means more is at stake than ever before. Audits of those gray areas such as culture and conduct are no longer a “nice to have” but a “must have” in any comprehensive risk-based audit plan. Stakeholder expectations are constantly changing, and regulators around the world continue to raise the bar for internal audit departments. The only constant in today’s audit profession is change, and a high-performing audit team is one that can constantly evolve to meet new challenges and seize opportunity.
Harrington High performance teams understand the organization’s mission, strategy, objectives, and risks and provide insight and foresight to enhance the organization’s success. Further, they understand the importance of evolving risk management; it won’t matter if you are world-class if you audit the wrong things. They understand stakeholder expectations, think about implications across the enterprise, and are responsive to a business context broader than the boundaries set by the audit plan.
At Raytheon, in addition to hiring experienced internal auditors, we hire high-potential talent from every function within the company to enhance our collective knowledge of the organization.
How can you ensure you’re recruiting high-performing auditors?
Harrington When business management believes we are a high-performing team, they see us as a talent pool for the organization and a key source to fill financial, operational, and IT positions in all functions. We measure, benchmark, and report our turnover into the business. Additionally, management willingly offers up its top talent to rotate through us because they see the unique value of that rotation.
We put our candidates through a comprehensive interview process focusing on competencies and results using behavioral interviewing techniques. Candidates are interviewed by multiple members of internal audit staff as well as leadership. We look for the best candidates regardless of background and education, and screen to ensure they are an appropriate fit for our high-performing team culture.
Carawan When looking to recruit top talent, I think it’s important to enable flexibility in one’s organizational design. Just because there isn’t a role that is a perfect fit for an individual, any leader should be strategic and think about the future needs of the audit department and the organization, and where that person might fit in the future. From a more practical perspective, we follow a very thorough recruitment process when recruiting staff at Citi. This includes having diverse slates for open roles and multiple and diverse interviewers for each role, including audit-delivery and non-audit-delivery staff such as human resources professionals. We also test candidates against Citi’s leadership standards, looking at not only what candidates have achieved in their careers, but how. This helps ensure only the very best, high-performing candidates join the team.
How can an integrated internal audit function boost performance?
Carawan The global and interconnected nature of risk means an integrated team is necessary to ensure top performance. A team that is made up of individual silos that do not proactively share information and check and challenge one another is ultimately a team doomed for failure. Communication and partnership are key in ensuring a team is looking at risk in a comprehensive, joined-up, and holistic manner.
Harrington Interestingly, when internal audit boosts its own performance, it will also be in a position to boost the organization’s performance. The central ingredient is people. We start by understanding the challenges, risks, and concerns facing the organization and convert those issues into a formal hiring strategy to attract diverse candidates with skills to assist internal audit in those areas. We also have a formal learning strategy to enhance team member competencies.
CAEs must substantially increase the dollars invested in team learning. We also must require team members to meet the company investment with their own investment. Finally, leadership must create the right environment, reinforcing the speed at which the world is changing and the need for continuous improvement, all while challenging, recognizing, and rewarding team members.
What soft skills are most important to audit performance and why?
Harrington These soft skills, not in order of importance, include: leadership; verbal, written, and presentation communication; diversity and inclusion; emotional intelligence; critical thinking; networking; listening and asking better questions; teamwork; negotiation; and adaptability.
Carawan Soft skills are just as important as hard skills when I think of a successful auditor. Being able to communicate effectively with other team members and ultimately stakeholders is key to carrying out a successful audit. This becomes critical when an auditor needs to deliver a tough message to a stakeholder in a productive and constructive manner. Effective communication skills help stakeholders move away from thinking of audit as the “police” and instead consider audit a partner who is there to help them manage risk.
What is innovation’s role in high-performance auditing?
Carawan A high-performing audit team is one that continuously evolves to meet the new challenges and seize the opportunities that arise from change. Within this context, innovation is of the utmost importance. Citi Internal Audit’s approach to auditing culture is a great example, as it demonstrates a direct response to a relatively new challenge facing the industry. Culture has long been on the corporate radar, but the financial crisis placed it front and center. With this spotlight on culture also came a need to assess its place within the control environment of financial institutions. Citi Internal Audit designed and rolled out a comprehensive approach to auditing culture in 2015.
Harrington Innovation is key to high-performance auditing. The world is changing at light speed and that will accelerate going forward. Every business and industry is under pressure to reinvent itself annually. CEOs and boards look to internal audit to assist in streamlining complexity, process, controls, etc. They look to us to be experts in Six Sigma, lean, and data analytics to help them drive the competitive changes necessary to survive. Insight and foresight are critical to innovation as are the hiring strategy and the learning plans to ensure we have the competency to deliver innovative solutions that help the organization achieve its objectives. Finally, look for innovation and leading practices from other industries and businesses, not just your own.
What is the biggest obstacle to high performance and how do you overcome it?
Harrington Complacency. We regularly benchmark against other global internal audit functions to learn leading practices and share those across our teams. We search The IIA’s website for thought leadership materials. We meet quarterly with all second lines of defense to share risks, trends, and leading practices. We have a continual risk assessment process and meet regularly with leaders inside and outside the company to keep abreast of risks.
Carawan The biggest obstacle to high performance is homogeneity. The day you have your leadership team sitting around the table with everyone nodding in agreement — you’ve got a problem. Every team needs constructive conflict to thrive. And this is not just limited to audit teams. Different opinions and views make us think, re-consider, and look at things from a different point of view. This is true at all levels of an organization. Leaders must foster an environment that welcomes constructive conflict, where staff feel like it is safe to speak up.