These are the Credibility Tips that I’m posting as a result of my article “The Credibility Component“.
Internal Auditor Credibility Tip #1 – Having a predictable approach to your communication is helpful. When starting any discussion, make it a habit to help others slide into the proper frame of reference. Here’s a quick example. If you are intending to discuss the “design” of a process, make sure you’re very explicit. Conspicuously begin the discussion by telling others that you’re only talking about “design”, not “documentation” or “execution”.
By establishing the context right at the start, it’s easier for others to follow along and participate. When you make it easy to communicate, you are building credibility.
Internal Auditor Credibility Tip #2 – Accountability matters. Often, a helpful initial step when planning an audit is to inquire into the “ownership” of the area you’re going to review. This may sound obvious, but a clear understanding of responsibilities is important.
So rather than simply start with a mindset to audit, say, “Inventory Management”, it may be helpful as a first step to talk with whoever is in charge of this activity (e.g., “Susan”) and establish a more definite understanding of exactly what Susan includes (and excludes) regarding her responsibilities as the Inventory Manager. This discussion will almost surely help you develop a more focused audit plan. And if Susan’s description of her responsibilities seems to be vague, overlapping, or poorly documented you might have your first audit discussion point long before you start the fieldwork.
It’s not an audit finding, of course. It’s just a point for further discussion at the very beginning of your audit planning. You might consider meeting with Susan (and her manager) to get clarity around responsibilities and build face-to-face relationships. It can be a private teaching moment to share the importance of clear accountability as it relates to a strong governance environment. When you help others see the big picture, you are building credibility.
Internal Auditor Credibility Tip #3 – Audit planning is very important. And it’s where a lot of audit communication takes place. So, it’s a critical opportunity for you to build credibility.
In our prior Credibility Tip, we suggested that you consider whether your auditee has clearly defined their goals and responsibilities. In other words, are they clear about what they are trying to accomplish? The next step, then, is to consider whether those goals and responsibilities make sense. Are there areas where they claim responsibility, but maybe should reside elsewhere? And, conversely, are there responsibilities that they are choosing to exclude, but shouldn’t? It’s a good idea to consider these questions while you’re gaining an overview of the area. It should take place as part of your planning process.
What you’re addressing is organizational (not departmental) efficiency – is there a better way to organize this function? Consideration of departmental efficiency comes later.
Don’t be afraid to consider and question organizational design. When you identify opportunities to introduce efficiencies at an organizational level, you are building credibility.
Internal Auditor Credibility Tip #4 – In prior credibility tips, we talked about the importance of having a clear understanding of accountability; who is the manager in charge of what you’re reviewing, and what are they including or excluding from their accountability?
Once that’s understood, the next step is often to consider how well that person has designed the operations, controls, and monitoring activities to deliver on their specific responsibility. This is the point where you might compare your understanding of the operations, controls, and monitoring (as designed) with any applicable standards or, perhaps, typical approaches that you’ve seen elsewhere.
Include consideration of potential threats. What might happen to derail the processes, as designed? And are there reasonable and appropriate controls and monitoring in place?
If you have recommendations to improve the design of the processes, controls, and monitoring, this is the time to discuss them with management. Since you have not yet actually started to review detailed records or data, be clear that this discussion is solely about the design of the process, not the results. Any discussions about outcomes or results will surface later in your review.
When you can share a focused discussion with a manager and demonstrate that you understand their operating objectives with a cost/benefit mindset, you’re building credibility.
To add value, you must be credible. Here’s my Internal Audit Credibility Tip #5.
In prior credibility tips, we talked about several stages of converting “audit-speak” into “manager-speak” to be more credible. The most recent tip reminded us how important it is for the auditor to be able to frame a discussion around real-world operating objectives with a cost/benefit mindset.
This particular tip is about cultural alignment.
As you’re reviewing the approach that a particular department is taking in pursuit of its responsibilities, it’s good to consider the style and alignment with your organization’s culture. Here are a few simple examples.
Maybe the area under review habitually experiences very high turnover, while the overall culture conspicuously values long-term commitment and the wisdom that flows from long-term employee relationships. What practices are causing this unusual turnover?
Or, perhaps you notice that the area under review maintains its process documentation in physical printed binders, while the rest of the organization is in the middle of a major project to get all documentation online. This department’s approach impacts its employees’ self-image relative to other areas of the organization.
If, during an audit review, you see ways that the approach or associated processes may contradict the organization’s culture, either formally or informally, you should discuss them with the manager. Maybe there are good reasons. Or maybe they just didn’t know.
When you can demonstrate that you are sensitive to organizational culture and you are helping to spread that culture throughout the organization, you’re building credibility.
To add value, you must be credible – so here’s my Internal Audit Credibility Tip #6.
In earlier credibility tips, we talked about how we can communicate effectively during our planning – when we are interviewing and gaining an understanding of our audit clients’ operations.
This current tip relates to our evaluation of how well their procedures and activities are documented and communicated.
If we determine that the documentation can be improved, we might suggest options. But most importantly, we should be very clear that we are solely talking about documentation and communication at this point. At an earlier phase of our planning, we might have identified and suggested potential improvements to their processes. But we’re past that now.
Even great processes may not be communicated well. Poor communications impact their team’s ability to work effectively.
So help them out. Their ability to communicate expectations is very important to their success. And be very clear that you’re only talking about documentation for this particular discussion point.
When you can demonstrate that you’re interested in helping them communicate and create a well-trained and motivated team, you’re building credibility.
To add value, auditors must be credible – Internal Audit Credibility Tip #7.
In earlier credibility tips, we talked about how we can communicate effectively during our planning – when we were gaining a broad understanding of how things should be working.
This current tip relates to our evaluation of how well operations are actually functioning. More specifically, it relates to our assessment of operational consistency.
Imagine that you’re now finished looking at the design of their operations. That’s where you reviewed and discussed what they intended to do. But are they actually doing it?
As you start transactional walk-throughs and detailed testing you may notice that what you’re seeing doesn’t exactly align with what you were told. That, alone, doesn’t imply anything from a control standpoint. Actual operations could be better (or worse) than what you had been told. The point is – it doesn’t align with their documented processes.
Maybe things veered off course due to poor monitoring by management. Or maybe management is fully aware and hasn’t updated their procedures to reflect reality. Either way, you have something you need to discuss. Documented procedures should match up with what they are actually doing. A disconnect like that can have unknown consequences down the road.
When you demonstrate that you are interested in assuring that staff and management are on the same page, as well as management’s ability to onboard and train new staff, you’re building credibility.
Internal Auditors must be credible before they can be influential. So here’s this week’s Credibility Tip. It’s #8 in the series.
The prior tip was about demonstrating that you are interested in assuring that staff and management are on the same page regarding their operations. If management thinks one thing is happening (through their written procedures) – and that’s not what’s actually happening (even though everything seems to be going smoothly) – management has a disconnect that they need to know about.
And that brings us to this week’s tip. It relates to management’s ability to effectively monitor their operations. Good monitoring is far more than assuring compliance with procedures. It also includes keeping an eye out for ways to do things better, avoiding operating losses, and looking at areas where fraud might be occurring. If they aren’t monitoring the right things, or they’re doing it the wrong way, sooner or later they are going to get blindsided by … something.
And no one likes bad surprises.
So here’s an opportunity where you can help.
When you talk with management about how their monitoring might be improved (and why it’s in their interest) you’re demonstrating your alignment with a culture of “no surprises”. You’re also showing that you care about their success. And you’re building credibility.
Internal Auditors must be credible before they can be influential. So here’s this week’s Credibility Tip. It’s #9 in the series.
The prior tip was about helping management create a good environment for monitoring their operations. No one likes unfortunate surprises.
This week’s tip moves from management’s day-to-day monitoring to governance oversight. This one is not so much about management’s ability to avoid bad surprises, it’s about leadership’s ability to set and adjust strategy.
Most departments report metrics of some type. They go up the chain and may even end up in a board report. The metrics that a department chooses to report must be accurate, of course. But even if they are accurate they may not give a complete picture to someone who’s not involved day-to-day. So it’s important that the metrics are not only accurate but that they tell the right story.
As you’re performing your review pay attention to the metrics that get reported. Of course, you’ll test if they are objective and accurate. But also put yourself in the position of someone who is not involved. Do these metrics paint the complete picture? What would help you if you were an executive relying on metrics?
If you feel like something should be added (or removed) to present a more complete and accurate view, you should discuss it with management. You’re never looking for more, you’re looking for better.
When you demonstrate your alignment with good governance and the need for executives to have an accurate picture of activities and results, you’re building credibility.
Internal Auditors must be credible before they can be influential. Here’s this week’s Credibility Tip. We’re up to #10 in the series.
The prior tip was about assuring that executives get the right data to help them fulfill their governance responsibilities. You build credibility when you help them see a complete and accurate picture of … everything.
This week’s tip involves the importance of stepping back and looking at the big picture before you’re done with an audit.
Throughout your audit, you have probably been looking at details. Maybe you have seen that processes are well-designed and are working perfectly. Maybe every control is in place. Data is tightly controlled. In short, you’re pleased to say that you have no recommendations whatsoever.
But … is the department delivering the results it should? How do they compare to industry benchmarks? Are their customers satisfied? Are expenses over (or under) budget? Maybe staff members seem short-tempered with each other. Maybe you have other observations that seem a little off – even though there’s nothing that would show up in a formal audit communication. These are things that might not be visibly harmful today but could be damaging down the road.
You should discuss these things with management. It’s in their best interest to hear your observations. You are providing them with a valuable outsider’s perspective of their area. While this discussion may be more subjective than some of the others we’ve discussed, it highlights your ability to see the big-picture.
If you handle this discussion discretely, you’re creating a partnering relationship focused on their success. And you’re building credibility.
Internal Auditors must be credible before they can be influential. We’re up to #11 in the series. And we’re nearing the end.
The prior tip was about providing management with helpful feedback with soft observations – things that would never be in a formal audit communication. If you see something that might help, why not share it?
This week’s tip involves the importance of looking into the future.
You are wrapping up your audit. No problems. Or maybe you have a few things to discuss with the manager.
Before you’re done, stop for a moment. Think about any fundamental assumptions that may not be as concrete as everyone thought. If we learned anything during the COVID era, it’s that we cannot count on even basic assumptions. Like being able to work on-site.
So what assumptions are important for this area? What trends might be impactful? What about staffing, remote work, data security, climate change, inclusion, the economy, regulations, etc.?
It’s important for management to regularly consider (or, perhaps, re-consider) the assumptions that drive their strategies and operations.
If they aren’t already discussing them from time to time, maybe you should facilitate that discussion before you wrap up the audit. This type of discussion demonstrates your strategic sense, your ability to monitor broad trends, and your talent for relating these trends to potential opportunities and challenges. And when you do this, you’re building credibility.
Internal Auditors must be credible before they can be influential. This is Credibility Tip #12 and the last in the series.
When you are predictable and consistent, you’re more credible. And that’s important.
We, as auditors, need credibility. So, when you’re communicating with management – in any context – be predictable and consistent. Start every discussion with a clear frame of reference. Help them confidently ease into the conversation.
If, for example, you have a suggestion for improving the design of internal controls be very clear right from the start that you’re only talking about “design”. Don’t allow the other person to mistakenly believe that you found an issue with “execution”. Even a momentary misunderstanding causes friction. And you both must go through the effort of getting back on the same page before the conversation can continue. And even small miscommunications harm the delicate process of building mutual trust.
So, avoid misunderstandings. Be very clear in every communication (whether written or verbal) about what you’re talking about (and what you’re not talking about). Don’t allow the other person to misunderstand you … even for a moment.
Because when the other person knows that they won’t have to first figure out your purpose, you’ve made it a lot easier for them. And they will know that conversations with you (now and in the future) will be useful and to the point.
This is the last credibility tip. If you haven’t read the others, I encourage you to read them. Actually, I encourage you to read the entire article. The ability to clearly communicate is the fuel that drives your influence. So, always make it easier for the other person to understand your message. Keep it simple. Be clear. Be accurate. Be credible.
