Transcript-Embracing the Next Generation of Internal Auditing

Hello. This is Kevin Donahue with Protiviti, welcoming you to a new edition of Powerful Insights. It’s time for internal audit leaders and professionals to stand up and ride their own wave of transformation and innovation, but the results of the latest Internal Audit Capabilities and Needs survey from Protiviti show that much progress still needs to be made in growing competency levels and next-generation auditing methodologies, in advancing innovation and transformation initiatives, and in communicating with audit committees. I had the pleasure of speaking recently with Brian Christensen to talk more about the results from this global research. Brian is executive vice president of global internal audit for Protiviti.

Now, while I’ve interviewed Brian many times, this actually is the second time we’ve recorded this particular podcast. The first time, we did it in March, just before the full onset of the COVID-19 global pandemic. Given everything that’s transpired in the world, I wanted to get Brian’s fresh take on this year’s results – how internal audit and their organisations have been affected by the pandemic, as well as their plans for the path forward. Brian, thanks for joining me today.

Great to be with you again, Kevin.

Brian, I want to dive into the results of our study, but first, I wanted to ask you about the elephant in the global room today, which is the COVID-19 pandemic. We conducted this survey last December, and we planned to release it in March. We put those plans on hold given everything that was happening in the world. What is your view right now about what you’re seeing in the market, some changes internal audit is looking to address for their organisations, and how they’re managing through this change and maybe planning their way forward?

Kevin, it’s a great start and preamble to our capabilities and needs survey. As you know, each year, we try to release that in conjunction with the general audit management conference put on by The IIA. As you said, we did the survey in December and really were looking forward to bringing the results forward at that conference in March.

That was really the peak of when activity started taking place, as maybe many members of our audience were going to be attending or participating in that conference, and suddenly, it was canceled. I think, as we look today with a rearview mirror, the concepts that we talked about have really become more relevant, and that’s interesting, because I think what’s transpired is that internal audit organisations around the globe are really being asked to take a hard look at themselves and what they can do to bring value and what is relevant.

I think with our waiting to see what’s transpired from COVID, we really do hope that everyone that’s out there listening to this, that their family and their businesses and all the people they interact with are safe, and taking care of all the things they need to do. We really brought forward that next-gen concept, and even some of the office of the future, about which we talk pretty extensively in our survey.

Let’s dive into some of these highlights of findings from our study. We asked internal audit leaders, CAEs and respondents to rate their competency levels and, in general, how they’re prioritising development of next-generation internal audit capabilities. Now, overall, what we saw wasn’t really great news. They don’t seem to be advancing in their skill sets or prioritising them appropriately. Do you agree with that?

I do, Kevin. It’s interesting from the survey results and talking with people. I think there was an early-adopter mentality. There were certain chief audit executives and departments that really embraced the use of the new tools, technology, methodologies to advance what they could do to serve the stakeholders that they work with every day. What we’ve seen over the years is there was a steady group there, but we seem to have hit this plateau where a number of people aren’t pushing that ball forward, and that’s disconcerting in several respects, because I think the auditors of today are really being asked, “How can you bring value to serve those stakeholders?”

I think an ancillary benefit to advancing your department is attracting talent and recognising that you’re taking and doing some of the cutting-edge things that are a required part of the tool set for the auditors to succeed today. I think the marginalisation we’ve seen – or a plateau, as it might be referred to additionally – is disconcerting. I think it’s incumbent on all of us as someone that’s a stakeholder in the profession. I want to see us taking those leaps forward, and I think it really resonates in the survey. We can’t stop and rest on our laurels. We need to continue advancing.

Brian, one point that I find interesting, I know I’ve heard you speak of this before: Internal audit leaders, CAEs – internal audit professionals, even – should be looking to do this even if no one is asking them, necessarily, among their different stakeholders. Wouldn’t you say that’s correct?

That’s absolutely right, Kevin. I think one of my bully pulpits is, we, as leaders with the responsibilities we have day to day to the companies, to the organisations, we serve, we need to bring the very best forward. If you compare ourselves to any other profession or vocation, no one ever says, “Give me those old things that we’ve tried time and time again.” We’re looking for the new technologies – such things as advanced data analytics, machine learning, use of robotic process automation, getting into aligned insurance.

All these topics that fit within what we refer to as a next-gen wheel are exciting, and they bring value at the end of the day. That’s one of the questions, Kevin, I get when we talk about the results of the survey and interacting with people. They say, “Well, how do I bring value?” Well, value is bringing insight and knowledge, and the things that we talk about here in this survey and around the next-gen wheel really provide a means to do that for the auditor.

Brian, another point you raised, I wanted to have you elaborate regarding team members and giving them opportunities. We make what I think is a very good point in our report about this. Especially for people looking for challenges, these types of opportunities, moving into these next-generation internal audit concepts is important. What will happen if leadership does not give their people these types of opportunities to be innovative?

Well, I think, Kevin, the workforce that many of us lead today, we’re seeing they want new demands. They want new challenges. They don’t want the steady state of the same thing year over year, and we, as internal audit professionals, have a tremendous opportunity to do that. I think a great example I talked to is that in recent years, we’ve seen people that – historically, we’d only hire accountants or audit majors off the college campuses around the globe, and then we saw the advent of data scientists.

But today, we’re really getting into seeing skills where people have a variety of capabilities to demonstrate these things, but they’ve also got critical-thinking and decision-making skills that make them a really important part. Are they out there with the ability of these tools to assist them, interacting with people, learning the business, doing the things? I think these competencies are absolutely critical. You look at the things that people are dealing with, whether it’s cyber or enterprise risk. Now, we’re talking about business resiliency in the COVID-19 era. These are a multitude of skills that just can’t be learned under one particular discipline, so I’m optimistic that those that embrace this, and look holistically at all of the skills on their team, can provide a bright light for people to pursue, and I think it’s one of the shining lights that we have within the profession at the present time.

Another point I wanted to bring up, maybe looking more at the bright side here, we’ve talked about some of the areas for improvement that internal audit functions have, but one of our findings show that while fewer internal audit groups appear to be undertaking some form of innovation or transformation, the maturity of those efforts and those capabilities that are underway appears to have increased. What does that tell you?

Well, I think it tells us that people are exploring to do new things, and I think one piece of material that I would offer here that I learned is when you see people going through design thinking or ideation exercises, which is becoming more prevalent as we try to innovate in all aspects of what we do. When you embrace team members to do that, there’s an opportunity for them, and they see what they can do, and the organisations that are doing that really bring in more insight, learning and value.

I keep talking about the value component. An auditor that just shows up with a report doesn’t really bring that value unless it’s tied to the business and can see where it’s there. I know during this period of COVID, we’ve seen lots of examples of companies I’ve worked with or feedback I’m hearing where people are setting down their pens – their proverbial pens, maybe – of what they’ve done in the past is being asked to do new challenges, and they’re rising to that occasion, and I think that’s the exciting part. When you combine people who are ambitious that can take risks to do new things with the things we talk about in next-gen, that’s what gives me the excitement for tomorrow in our profession.

I want to remind those of you listening that you can find our report, Exploring the Next Generation of Internal Auditing, at protiviti.com/IASurvey. Brian, one final question for you: From the perspective of the audit committee, the group that, obviously, internal audit is reporting to regularly, what is their view, or how are they looking at next-generation internal audit practices? Our survey suggests they want their CAEs to be leveraging these types of skills and capabilities more, and communicate in that type of manner as well.-

Kevin, this is one of my favorite questions to receive, and it’s a great one to wrap up our call with today. What I hear from audit executives is often, they feel reluctant to try to push that envelope to do something new and different. One of the tidbits I offer as an example is, can you go to your audit committee and share one or two examples, or maybe you’ve put in a robotic process automation around a control, or another way to gather insight from that RPA into the business.

As soon as you can start to demonstrate you’re putting in some forward-looking tools and mentality, it starts to create a vortex in which they just want more. I think audit committees typically consist of really smart executives that want to know, “Is there something we can do to really help the business?” and audit executives and audit teams that do that really are on the path of success because what typically happens is, they don’t say, “Stop.” They say, “What else can you do? Can you do some more of this?” and I think that’s the exciting piece of what all this is, Kevin: We have that capability. We’re seeing it every day, but everyone needs to take that first step, and I would encourage people to do that. A lot of those steps are described within our report, and I really appreciate being with you again today.

This was a great conversation yet again, Brian. Thanks for joining me.

Thanks, Kevin.

I want to thank Brian for joining me today to discuss the results of Protiviti’s latest Internal Audit Capabilities and Needs Survey. For more information and to read our report, Exploring the Next Generation of Internal Auditing, please visit here, where you will also find our infographic, video and other informative content. Finally, I encourage you to subscribe to Protiviti’s Powerful Insights podcast wherever you find your podcast content.