Viewpoints.

Position:Audit directors share views on issues facing their profession - Cover Story
 
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At the IIA General Audit Management Conference held earlier this year, 13 audit directors tackled some of the most complex and difficult issues facing the profession. In one-on-one interviews, the directors commented on topics that reflected their particular concerns and interests.

Many aspects of this project were intriguing. For example:

* No two of the 13 directors opted for the same "hot topic," although they chose them independently.

* Detachment and caution, often the auditor's stock in trade, were much less obvious than passion during these interviews. Most of the directors displayed strong convictions and spoke openly about their topics.

* Although all of them addressed different subjects, the directors' observations and insights all underscore dramatic changes and challenges within the profession.

Taken together, the interviews provide a fascinating portrait of internal auditing, circa 1994. Singly, some of the ideas, implications, and advice will provide a fertile and provocative fabric for internal auditors who want to examine and assess for themselves what's happening in their profession.

Jerry Wernz Director of Audit and Security Boise Cascade Corporation Boise, Idaho

Change

It's pretty exciting to be in a profession that is just in the process of being turned upside down. I think that's what's happening today. Many of the premises on which we have built our profession are being challenged, and a lot of internal auditors are being hauled kicking and screaming into this new era.

In the first place, we've got a rapidly changing business environment. The dynamics are just incredible. At the recent General Audit Management Conference, one of the speakers described the scene as "crazy times for crazy people."

At the same time they're asking us to be a little crazy, we're facing intense pressure to reduce costs and improve processes. We internal auditors are being compelled to make our function a value-added process. I don't think we thought of ourselves in that way in the past. We thought we were contributors, but I think many of our internal customers didn't see us as adding value.

I believe that performing audits on a cycle rotation is becoming obsolete and that it's a concept that is going to have to be discarded, along with some other long-held audit approaches and processes. Bureaucracy and procedure manuals, multitier management, and other controls are becoming too expensive to maintain. They are in full retreat in our company and, I think, in other companies as well.

Formal controls, such as policies, procedures, rules, regulations, organizations, bureaucracies, and central audit authorities are becoming replaced by informal controls such as competence, trust, shared value leadership, and high expectations. Auditing formal controls doesn't require immensely talented people in terms of personal and intuitive skills. We've needed bright, mechanically good people, but not real talent. Those old compliance methods don't work anymore, and we're going to be needing people with different abilities.

To get out of any kind of bind, and I think our profession is in one, you have to have two things -- awareness and choice. One of our problems is that a lot of our people don't know yet that they have a problem, so they aren't choosing. And there are some people who just won't be able to change. These are the auditors who want to avoid all the talk of added value and quality, and all the turmoil of a changing business world. They will also be avoiding survival.

Cheryl Cooper, CPA Director, Internal Audit Department American Association of Retired Persons Washington, DC

Audit Committees

Effective relationships with audit committees have become a critical element in the work of internal auditors. The responsibilities, power, and public profiles of audit committees have been boosted by emerging corporate governance issues; and audit committee members are relying more and more on a strong internal audit link to help them fulfill their mission. Likewise, internal auditing departments are finding that audit committees can provide them with concrete help in carrying out their functions and raising the level of their effectiveness.

Mutual trust and respect and a mutual commitment to communication between the audit committee chair and the director are essential. In my own organization, I also report to the executive director on a day-to-day basis for supervision, and I report to the audit committee and the executive committee with regard to what I review. The audit committee chairperson receives copies of all the internal audit reports that we issue, and he determines which ones he would like to circulate to other members of the committee.

I communicate on a regular basis with the chairperson of the audit committee, and I meet with the entire committee at least three or four times a year. The meetings are scheduled for a full day, and if we need to continue them into another day, we do. We're probably fortunate at the American Association of Retired Persons that the members of our audit committee are retired, so that they have more time to devote to the committee.

One of the most effective roles the internal audit director can assume is to keep the committee focused on what's best for the organization. Politics and political influence do exist, even in entities committed to independence. If biases, preconceived ideas, and private agendas seem to be distorting an issue, I think a respected audit director can present or bring the situation back to the most objective point of view possible.

An audit director needs to be able to deal objectively and independently with audit committees -- without fear of losing one's job. It's the way internal auditors can be of most value to the audit committee, whose work is being scrutinized more closely than ever before.

Renato Fassbind, PhD, MBA, CPA Senior Vice President Corporate Audit ABB Asea Brown Boveri Ltd. Zurich, Switzerland

Quality

Internal auditors must be obsessed with quality. In fact, the pursuit of quality is the reason for our existence. It seems ironic that, in one sense, our most fundamental goal is to make our function redundant; because when we achieve total quality, when all our processes and products are perfect, internal auditing will no longer be needed. Such perfection will never happen, but it...

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