Digging for knowledge: Business acumen within internal audit teams reinforces their value and reduces their limitations.

Author:Piper, Arthur

Every month, Jorge Badillo, internal audit manager at SCM Minera Lumina Copper Chile, leaves company headquarters in Santiago and takes a two-hour flight followed by a three-hour drive to the organization's mines in the Atacama Desert. Donning a hard hat, he inspects the mines and makes sure he understands the issues that arise in the pit and plant. "The mine site is where things in this business happen," Badillo says. "Internal audit's job is to fully understand the everyday challenges the company faces."

Next year, for the first time, Badillo and his three-person audit team will carry out what he calls a water balance audit. Water is a key resource in the extraction industry, but a scarce resource in the desert, and the company must comply with statutory rules and regulations. The audit will look at how much water comes into the mine, how much goes out, and the level of recycling the mining process entails. This will provide third line of defense assurance to the continuous checks already carried out by management. His audit will aim to identify opportunities to improve how water is used and controlled. Badillo will use a subject matter expert from his cosourced audit supplier to help, with the understanding that there will be knowledge sharing between the service provider and his team.

"We'll get a deeper understanding of the audit process, a more rigorous audit, and, in future engagements, we'll be able to do more of it ourselves," he says. "Building such business knowledge is critical to audit's ability to serve the organization." Badillo's team conducts audits on explosives used to mine raw materials, but, he says, without in-depth knowledge of the type and nature of the explosives used, the team would merely be doing a purchase-to-pay audit. Management needs an assessment of the quality and effectiveness of the explosives, themselves, which takes the audit to another level in terms of its value to the company.

Badillo applies a risk-based audit approach in developing the rolling five-year internal audit plan. About half of all audit engagements have an operational focus, such as fuel management, reagents management, logistics and shipments, and other core business areas. For that reason, business acumen is a prerequisite for success.

Building business acumen within the audit team has never been so important. With fast-changing geopolitical events; disruptive business models; and the increased impact of digitalization on business products, processes, and services, internal auditors need to know their organizations inside out if they are to provide effective and relevant audits. Aligning with the business strategy and objectives, creating a culture of learning within the audit team, and rotating experts through the audit department can all help.


Before Badillo relocated to Chile from Ecuador and joined the mining industry, he worked in banking, oil and gas, and in a Big Four firm, but knew little about his new sector. Since then, he has put himself and his team through an intensive, continuous self-learning process to develop the business acumen needed...

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