Financial Leadership – Transforming Internal Audit
By David Chiang CA.CIA, CMC, ACDA
As today’s Chief Audit Executive works to evolve Internal Audit to make it more integrated with an organization’s strategic initiatives, the role of the Chief Financial Officer in facilitating this transformation is an important consideration. A visionary CFO, who understands the value of Internal Audit, can be a useful ally and catalyst agent for change.
The report “Financial Leadership in Challenging Times” published by PricewaterhouseCoopers in November 2009 provides a snapshot of the influential perspective of the CFO. “CFOs [who have] the vision to look beyond core functions of finance and the fortitude to use their financial acumen and insights to drive new value and higher levels of business transformation and performance” will be needed in these challenging times.[1]
The report goes on to say that one key area for the CFO to drive success rather than remain in survival mode is to “achieve continuous improvement in accuracy, timeliness and cost effectiveness of control and compliance activities.”
This quote resonated with me greatly, as I have been articulating this concept in recent articles and presentations. Using leading edge data analysis technologies to provide an organization with improved business assurance is a critical way to achieve improved results for both the internal audit department and for the organization as a whole.
To support the CFO as an agent of change, CAEs need to inform CFOs about current developments in technology-enabled auditing. For example, data analysis that previously had to be done manually on a repetitive basis can now be performed automatically using audit technology. This frees up auditors from repetitive manual data analysis to focus on other value-based audit tasks. Technology such as ACL AuditExchange enables users to manage the frequency, timing and parameters of automated analytics, as well as have an overall view of scheduled analyses past and present.
Providing internal auditors with content management capabilities also makes for a more efficient audit team. The ability to store key audit evidence, including data, analytics, results and all forms of working papers, in a secure and centralized location, enables audit shops to be more organized and better at acquiring and assessing their audit results.
Further, the move towards more continuous assurance over controls and risks can be achieved with the use of exception management technology, which allows audit teams to easily distribute exceptions found during data analysis testing. These results can be communicated to management and operational staff for further follow up – improving the overall controls and compliance environment. Thereby allowing the CFO to take comfort that the organization’s internal controls and remediation programs are working as intended.
Visionary CAEs and CFOs who have the foresight to innovate across the organization, including adopting best practices in their internal audit departments, can be drivers of improved operational performance and business excellence. As stated in PwC’s report, “a sustained, focused program of financial leadership invests continually in people, process and technologies.”
It’s now up to CAEs, supported by the CFO, to accept this mantle and truly become a change agent in transforming the internal audit department and taking a place at the leadership table.
[1] PwC’s “Financial Leadership in Challenging Times” report is downloadable at: http://www.pwc.com/us/en/increasing-finance-function-effectiveness/publications/financial-leadership-in-challenging-times.jhtml
David Chiang, CA.CIA, CMC, ACDA is a recognized professional on the use of audit analytics to monitor organizational compliance. He has presented his theories and case studies at numerous internal audit and system control conferences throughout North America.
As a Chartered Accountant, Certified Management Consultant and Certified Internal Auditor, David has extensive experience in analysis, fraud detection, and system integration consulting. He is currently General Manager and Director, Professional Services with ACL Services Ltd. – a Vancouver-based software company that provides audit analytic technologies to the Governance, Risk and Compliance market.
David is a member of the The Institute of Internal Auditors (The IIA), Canadian Association of Management Consultants (CAMC) and Canadian Institute of Chartered Accountants (CICA). He was twice elected to the Council of the Institute of Chartered Accountants of BC (ICABC), which is responsible for the governance of the accounting and audit profession in BC. He currently serves on the ICABC Professional Conduct Enquiry Committee and Rulings Committee.
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