epic factor

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Can You Be An “EPIC FACTOR”

OR

“The Ten Internal Audit Commandments”

Paul WallisDirector - Internal AuditCity of Vaughan

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Concerns Are Evident

• More than half (55%) of Senior Management don't feel that Internal Audit adds Significant Value to their Organization

• Nearly 30% of Board Members believe Internal Audit adds less than Significant Value

• On Average, only 49% of Senior Management believe Internal Audit is performing well at delivering on Expectations

Source: PWC 2014 State of Internal Audit Profession | www.pwc.com/ca/iastudy

79%

of board members believe that internal audit can contribute to the organization

[Capability]

79%

of board members believe that internal audit can contribute to the organization

[Capability]

44%of executive management see internal

audit contributing

significant value

35 % Gap

23 % Gap

56%of board

members view internal audit in

their organization as strong

Source: Adapted from - PWC 2013 State of Internal Audit Profession | www.pwc.com/ca/iastudy

Expectation Disconnection

The ChoiceFrom Rags to Riches

Internal Auditors have a choice. They can give

emphasis to policing and protection or they can

give emphasis to learning and consultation

Peter Block: Stewardship – Choosing Service Over Self Interest

FROM

TO

IA

IA

Ten Principles or Commandments

• E – Educate

• P – Participate

• I – Integrate

• C – Communicate

• F – Facilitate

• A – Authentic

• C – Conserve

• T – Tolerate

• O– Originate

• R – Respect

Principle 1 - Education

Develop Technical

Skills

Educate Our Clients

Educate Ourselves

More Than Just Learning About How To Audit!!

Principle 1 - Educate

Educate Ourselves

• Develop a better understanding of the clients business and the interdependencies.

• Make sure we really understand what our core business and knowledge skills are.

• Be sure we know what constitutes value to our clients.

Educate Our Clients

• Build risk and control awareness – education sessions.

• Promote the internal audit value proposition.

• Support and promote stewardship responsibilities at every level.

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Principle 1 - Educate

The staff group’s [of which Internal Audit is one] primary focus is to transfer their expertise to the line units. Education, support and consultation is what replaces policing and granting permission.

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Principle 2 - Participate

Fundamental Questions

• Are we good at just Finding Issues or are we good at helping find Solutions??

• Can we really make Constructive Recommendations without truly Understanding the Business??

• How do our Clients view us – Helpful or “Rats…..the Auditors are coming”!!

Principle 2 - Participate

What Makes Clients Happy – My

Experience

• We really care about their Business.

• We are open to Discussion.

• We are Solution Focused not Problem Focused.

What Makes Clients Sad – My

Experience

• Unwilling to offer Advice and Solutions.

• Lack of Depth.

• Impractical and Unrealistic Recommendations.

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Principle 2 - Participate

Tips

• Remove Recommendations from Reporting – Participate with Client in Developing Action Plans.

• Participate in Focus Groups and Key Projects/Studies – Offer advice when it is asked for.

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Principle 3 - Integrate

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Principle 3 - Integrate

Fundamental Questions

• Are we part of the Organization or just Observers?

• Are we willing to get our hands Dirty?

• Are we willing to commit to Organization Values?

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Principle 3 - Integrate

Tips

• Use “Independence” Wisely. Real Independence [Objectivity – “State of Mind”]. Perceived Independence.

• Be Part of the Team.

• Be a Change Agent!

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Principle 4 - Communicate

AuditorClients

The Most Important Skill for an Auditor is the Ability to Listen!!

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Principle 4 - Communicate

Fundamental Issues

• The “Recommendation Merry Go Around”.

• Confusing Communicating with Reporting.

• “Publish or Perish” Mentality.

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Principle 4 - Communicate

Tips

• Read the Standards – Carefully!!

• Listen First ………….and Often.

• Don’t be Married to the Report – Consider what we are trying to Achieve.

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Principle 5 - Facilitate

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Principle 5 - Facilitate

Tips

• Talk to Many – Get the Total Picture.

• Facilitate Solutions in Groups [Risk Management].

• Facilitate to Promote Internal Audit Core Values.

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Principle 6 – Authentic[ate]

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Principle 6 – Authentic[ate]

Misalignment??

“…..so you have a unit in finance evaluating the operating controls of line departments and reporting directly to the board of directors. Very Muscular!!”

Peter Block: Stewardship – Choosing Service Over Self Interest

“We are here to help”Various Random Auditors

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Principle 6 – Authentic[ate]

Tips

• Support the Integrity of the Client’s Concerns.

• Place more Importance on Pursuing the Purpose of Helping Others rather than being Prideful of what you Know.

• Seek win-win partnerships – Give and Take.

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Principle 7 – Conserve

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Principle 7 – Conserve

Problems of Bureaucratic Control

• Rules easier to make than Delete….Leads to Red Tape.

• Organization can become too Standardized and not Flexible.

• Promotes a more “Policing” Culture.

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Principle 7 – Conserve

Questions??

When was the last time you either recommended removal of a control or recommended removal of a Policy?

Don’t we usually recommend controls or policies, what will we do if we don’t?

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Principle 7 – Conserve

Tips

• Practice and Promote good “Control Economics”.

• Place Emphasis on the Right Controls to Manage the Right Risks.

• Look for Redundant or Non-Sustainable Policies.

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Principle 8 – Tolerate

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Principle 8 – Tolerate

Fundamental Questions

• Are we Prepared to accept Criticism from our Clients?

• Are we Prepared for the Value Question?

• Do we Accept Ambiguity?

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Principle 8 – Tolerate

Tips

• Ask the answer to the Value Question!!

• Keep an Open Mind.

• Recognize and React to Criticism from all our Clients

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Principle 9 – Originate

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Principle 9 – Originate

Do we Follow the Yellow Brick Road?

OR……. Do we Think Outside the

Box?

Because

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Principle 9 – Originate

Tips

• Question Everything you Do.

• Take Intelligent Risks.

• Support and Demonstrate Continuous Improvement.

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Principle 10 – Respect

“Don't ever underestimate the importance of treating others with respect and kindness.”

Alison Levine, On the Edge: The Art of High-Impact Leadership

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Principle 10 – Respect

Tips

• Respect the Client’s Time!

• Respect the Client’s Business!

• Respect the Client’s Problems!

Summary in Word Bites

1. Educate! Educate! Educate!

2. Actively Participate!

3. Be a Team Player!

4. Listen First and Listen Often!

5. Facilitate Solutions with Many!

6. Do What you Say!

7. Practice Control Conservation!!

8. Accept and Act on Criticism!

9. Think Outside the Box!

10. Respect Others!

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Hmmmmm!!

Auditing’s deeper purpose is to support stewardship responsibilities at every level. In a stewardship environment, middle managers and core workers would be the prime customers, top management and audit committee would get secondary attention.

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So!! – Can You Be an Epic Factor??

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Paul WallisDirector - Internal AuditCity of Vaughanpaul.wallis@vaughan.ca