INTERNAL AUDITORS AS CHANGE AGENTS: WHAT A DIFFERENCE A YEAR MAKES!

Abstract

It was evidenced in a multiple-case study that the pattern of interaction between Chief Audit Executives and Senior Management is a key determinant of Internal Audit effectiveness. There are notable differences among Internal Audit Functions. The effectiveness of Internal Audit is largely determined by “soft factors.” Therefore, where Senior Management, possibly pushed by the supervisory board or the owner himself, truly supports the Internal Audit Function and wants it to look at the right matters, its effectiveness will be fundamentally different from cases where the management and/or board is passive, and does not push the Internal Audit Function to become effective by unearthing matters they may not wish to be found. In the upper echelon of Management, interaction with the chief stakeholder/s typically happens frequently, in a timely manner, and the communication is geared toward problem-solving. The relationship is strongly based on shared goals, shared knowledge, and mutual respect. At the other end of this spectrum, interaction with the chief stakeholder/s happens in-frequently, is typically delayed, and the communication is rather geared toward finger-pointing. In this context, functional goals prevail, knowledge is preferably exclusive, and relations can be impaired by disrespect. This article provides conceptual and practical insights into features within the more immediate control of the Chief Audit Executives, helping or hindering Internal Audit effectiveness. Self-perception and external perception can differ greatly. Positioning and communication are instrumental when identifying successful Internal Audit Functions; these make a fundamental difference as to whether the Internal Audit Function is positioned as police, servant, consultant, doctor or change agent. Practical insights then demonstrate what a difference a year makes. Guided by the change agent, the more effective Internal Audit Function can prove also with hard data that there are fewer overdue findings, that reports are delivered more swiftly, and quantum leaps of productivity can be achieved.