​​​​For Internal Audit, the Sun Should Never Set on Independence Day

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Residents of the United States celebrate the nation's Independence Day on July 4th. For most, the holiday provides an opportunity to enjoy a day away from work, cook out with friends and family, and possibly set off fireworks, as is the American tradition.

To differing degrees, citizens of every country on the planet revel in recognition of the date when their homelands achieved sovereignty and self-determination. To be sure, there are 30 nations that have independence days in July, including Belarus, Canada, South Sudan, and Vanuatu. But I wonder, how many residents of these diverse nations actually stop to ponder their independence and what it means?

Independence Day celebrations offer citizens the opportunity to put their patriotism on display. With few exceptions, the majority of people in most countries take pride in their national sovereignty, associating independence with unity of purpose and freedom.

Indeed, many conflate independence with freedom and liberty. While the three are often used interchangeably, they are not synonymous. Independence applies to national sovereignty, while liberty and freedom are concepts applied to the individual right to be free from oppression and to exercise the power to choose — how to speak, act, and think — without fear of repression.

Independence is also a term widely used by internal auditors. But, internal auditing has a muddled relationship with the word. It features prominently in The IIA's definition of internal auditing, which reads in part, "Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve organizational operations. ..."

But are internal audit functions truly independent? The definition of independent is: free from outside control; not depending on another's authority. Internal audit functions can't quite make that claim. Ideally, internal audit is allowed to operate without interference, enjoys unfettered access to data and people, and has sufficient resources to get the job done. But it is not completely independent of the organization. It is not free from outside control or independent of another authority. After all, management and the board can hire and fire the CAE, and management signs the paychecks of every employee in the function.

Another similarity is that internal auditors sometimes conflate the word independent, not with liberty or freedom, but with objectivity. It is vital that practitioners keep those two concepts clear and distinct in their minds. While the degree of independence of the audit function may be challenged by less-than-ideal conditions, objectivity is a state of mind, and must never be compromised in the work we do.

An internal auditor's objectivity, the quality of not being influenced by personal feelings or opinions in considering and representing facts, must remain uncompromised no matter the personal or professional circumstance in which he or she operates.

Independence and objectivity have a symbiotic relationship in internal auditing. When the internal audit function is independently aligned in the organization, internal auditors are afforded a greater opportunity to be objective. And, when internal auditors consistently demonstrate objectivity, internal audit's independence is reinforced.

The profession has struggled from time-to-time to demonstrate its value to stakeholders. But there is mounting evidence that stakeholder appreciation for internal auditing's ability to provide holistic and insightful assurance and advice is on the rebound in many organizations. More than ever, stakeholders are turning to internal audit to provide insight and foresight on matters outside of financial and compliance risks. We must impress on them that operational independence helps internal audit meet those growing demands.

Over the course of a year, more than 200 nations celebrate their independence days. The IIA stands ready to help internal audit functions in each one of these nations achieve and maintain organizational independence. For internal audit, the sun should never set on Independence Day.

As always, I welcome your comments. ​

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