Rising to New Challenges

Can You Be An “EPIC FACTOR”

Be Different, Make a Difference But Don’t be a Difference

Paul Wallis

Director - Internal Audit

City of Vaughan

Rising to New Challenges

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

Rising to New Challenges

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

Disconnect Between Senior Clients

Rising to New Challenges

The Choice From 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

Rising to New Challenges

Ten Principles

• E – Educate

• P – Participate

• I – Integrate

• C – Communicate

• F – Facilitate • A – Authentic • C – Conserve • T – Tolerate • O– Originate • R – Respect

Rising to New Challenges

Principle 1 - Education

Develop Technical Skills

Educate Our Clients

Educate Ourselves

More Than Just Learning About How To Audit!!

Rising to New Challenges

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.

Rising to New Challenges

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.

Rising to New Challenges

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”!!

Rising to New Challenges

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.

Rising to New Challenges

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.

Rising to New Challenges

Principle 3 - Integrate

Rising to New Challenges

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?

Rising to New Challenges

Principle 3 - Integrate

Tips

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

Perceived Independence.

• Be Part of the Team.

• Be a Change Agent!

Rising to New Challenges

Principle 4 - Communicate

Auditor Clients

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

Rising to New Challenges

Principle 4 - Communicate

Fundamental Issues

• The “Recommendation Merry Go Around”.

• Confusing Communicating with Reporting.

• “Publish or Perish” Mentality.

Rising to New Challenges

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.

Rising to New Challenges

Principle 5 - Facilitate

Rising to New Challenges

Principle 5 - Facilitate

Tips

• Talk to Many – Get the Total Picture.

• Facilitate Solutions in Groups [Risk Management].

• Facilitate to Promote Internal Audit Core Values.

Rising to New Challenges

Principle 6 – Authentic[ate]

Rising to New Challenges

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

Rising to New Challenges

Principle 6 – Authentic[ate]

Tips

• Support the Integrity of the Clients Concerns.

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

• Seek win-win partnerships – Give and Take.

Rising to New Challenges

Principle 7 – Conserve

Rising to New Challenges

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.

Rising to New Challenges

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 don’t?

Rising to New Challenges

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.

Rising to New Challenges

Principle 8 – Tolerate

Rising to New Challenges

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?

Rising to New Challenges

Principle 8 – Tolerate

Tips

• Ask the answer the Value Question!!

• Keep an Open Mind.

• Recognize and React to Criticism from all our Clients

Rising to New Challenges

Principle 9 – Originate

Rising to New Challenges

Principle 9 – Originate

Do we Follow the Yellow Brick Road?

OR……. Do we Think Outside the

Box?

Because

Rising to New Challenges

Principle 9 – Originate

Tips

• Question Everything you Do.

• Take Intelligent Risks.

• Support and Demonstrate Continuous Improvement

Rising to New Challenges

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

Rising to New Challenges

Principle 10 – Respect

Tips

• Respect the Clients Time!

• Respect the Client Business!

• Respect the Clients Problems!

Rising to New Challenges

Summary in Word Bites

1. Educate! Educate! Educate!

2. Actively Participate! 3. Be a Team Player! 3. 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!

Rising to New Challenges

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.

Rising to New Challenges

So!! – Can You Be an Epic Factor??

Rising to New Challenges

Paul Wallis

Director - Internal Audit

City of Vaughan

paul.wallis@vaughan.ca