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Relationships and Risk Insights from Stakeholders
CBOK Stakeholder Study Agenda Primer on “Critical Non. Technical Skills”
About the Stakeholder Study Global Surveys 1, 124 The purpose of the Common Body of Knowledge (CBOK) 2015 stakeholder study is to gain a better understanding of global stakeholders’ expectations with regard to internal audit’s purpose, function, and performance. This study was developed in partnership between The IIA Research Foundation and Protiviti. Global Interviews 100+ IIA Institute Partners 13 Languages www. theiia. org/cbok 23
General Themes Internal audit does many things well that could be considered foundational elements of assurance work. There are opportunities for internal audit to add value to their organizations by spending more time focusing on risk identification and management in addition to assurance work. Internal audit should focus more on strategic risks, but exactly what the stakeholders mean by that is less than clear or consistent. Increased demands on internal audit will require CAEs to prioritize competing demands. Managing these conflicts requires strong relationship and communication skills.
Stakeholders Give Internal Audit High Marks on Foundational Elements
High Ratings in Foundational Elements More than 70%. . . More than 80%. . . Top three criteria used to evaluate the performance of internal auditors: Assess areas or topics that are significant. Stakeholders agree or strongly agree that internal auditors: Keep up to date with changes in the business. Sufficiently communicate audit plans.
Expectations to Move Beyond the Basics
Beyond Assurance Many respondents note that they see value in advisory services. What should this non-assurance work cover? Identify known & emerging risk areas 85% Facilitate & monitor effective risk. . . 78% Identify appropriate risk management. . . 78% Consult on business process. . . Alert operational management to. . . Assurance on compliance with legal. . . 76% 74% 71% The clear answer is “risk”
Focus on the Right Risks
A Paradox of Structural Expectations Do you believe IA should be more active with assessing strategic risk? Yes No Unsure 58% 24% 18% How? Focus on strategic risks as well as operational, financial, and compliance risks during audit projects. Periodically evaluate and communicate key risks to the board and executive management.
A Paradox of Structural Expectations Valued Expected
Manage Competing Demands
Strategies for Prioritizing Competing Demands Strong relationships with operational and functional leaders Effective reporting structure within the organization, for example, reporting into the C-Suite 77% 51% Regular presence in appropriate board or board committee meetings 49% Involvement in enterprise risk management 48% Reporting directly to the audit committee 44%
Key Report Takeaways Preserve the foundational elements Explore adding more advisory work Focus on risk activities Demonstrate understanding of strategic risks Build your soft skills www. theiia. org/cbok
From “Soft Skills” to “Critical Non. Technical Skills”: Some Social Science Behind Auditing
Circle of Trust & Cooperation: In Group – Out Group Dynamics
Circle of Trust & Cooperation: In Group – Out Group Dynamics
In Group – Out Group Dynamics In-group favoritism • A preference and affinity for one's in-group over the outgroup or anyone viewed as outside the in-group. • Expressed in evaluation of others, allocation of resources, and many other ways. • A key notion in understanding in-group/out-group biases is determining the psychological mechanism that drives the bias. One of the key determinants of group biases is the need to improve self-esteem. • Individuals will find a reason, no matter how insignificant, to prove to themselves why their group is superior. Source: Boundless. “In-Groups and Out-Groups. ” Boundless Sociology. Boundless, 08 Jan. 2016. Retrieved 13 May. 2016 from https: //www. boundless. com/sociology/textbooks/boundless-sociologytextbook/social-groups-and-organization-6/types-of-social-groups-53/in-groups-and-out-groups-33810455/
In Group – Out Group Dynamics Intergroup aggression • Any behavior intended to ‘harm’ another person because he or she is a member of an out group. • A by product of in-group bias, in that if the beliefs of the ingroup are challenged or if the in-group feels threatened, then they will express aggression toward the out-group. • The major motive for intergroup aggression is the perception of conflicting interests between in-group and out-group. • The way the aggression is justified is through dehumanizing the out-group, because the more the out-group is dehumanized the "less they deserve the humane treatment enjoined by universal norms. " Source: Boundless. “In-Groups and Out-Groups. ” Boundless Sociology. Boundless, 08 Jan. 2016. Retrieved 13 May. 2016 from https: //www. boundless. com/sociology/textbooks/boundless-sociology-textbook/social-groups-and-organization-6/types-of -social-groups-53/in-groups-and-out-groups-338 -10455/
Beware the “Super Chicken”
Mind Your Self Importance “Every act of conscious learning requires the willingness to suffer an injury to one’s self esteem. That is why young children, before they are aware of their self importance, learn so quickly. ” Thomas Szasz
Build Strong Professional Relationships Based on Integrity and Trust • • • Do what you know is right even in difficult times Involve others in your business Understand others business Trustworthy = Honesty + Competence + Reliability Don’t hide behind independence Source: Lessons Learned on the Audit Trail by Richard Chambers, IIA President and CEO
The 3 Stages of Auditor Self Awareness Stage 1 You might be wrong No! IA Stage 2 You might be wrong Stage 3 Maybe IA I might be wrong IA
Beware of Logical Fallacies “Most of us illogically believe that we are logical thinkers” Jason Silva
Logical Fallacies Source: https: //yourlogicalfallacyis. com/
Provide a range in which the correct answer falls: Distance between the Earth and Venus (in miles) Average number of bees in a hive Population of Mauritius
Which way is the bus going?
Exploratory vs. Explanatory Finding the two pearls amongst one hundred oysters. Storytelling with Data: A Data Visualization Guide for Business Professionals Cole Nussbaumer Knaflic
Building the Value Proposition for Your Audit Collaborate Understand Explain Align Define • Your mission • Internal Auditing • Audit objectives • Business objectives • Your purpose • Audit process • What’s in it for management • Management’s expectations • Attitude toward being audited • Assessment of risks and controls • Root cause analysis • Action plans
Question Jim Pelletier, CIA, CGAP Vice President, Professional Solutions jim. [email protected] org