Guest Auditors Fill Department Needs, Expand Work Experience
By Steve Stanek, KnowledgeLeader contributing writer
Many internal audit departments are stretched thin when it comes to available resources. The lack of resources becomes especially acute when the department requires the skills of special subject-matter expertise for a particular audit. Some companies are addressing this specialized resource need by inviting guest auditors to work with their audit teams to leverage expertise on specific audits. Guest auditors typically come from within the organization - either from line positions or business-unit staff capacities, usually for short-term audit assignments. Internal audit is a definite benefactor when assigning an employee with in-depth functional or business-unit knowledge to their engagement teams. In turn, guest auditors benefit from these assignments by gaining a better understanding of the company’s audit processes and why specific audits take place. This guest auditor experience is also viewed as a career enhancement since the subject-matter experts gain experience above and beyond their normal duties and become well versed in audit terms and processes. This knowledge is especially useful the next time their department comes into scope on the internal audit plan.
At Estee Lauder, one of the world’s leading cosmetics companies, the internal audit department started a guest auditor program last year when the company “could not find enough people to fill the staff,” says Bob Tyler, Estee Lauder’s vice president of internal audit. This meant evaluating whether they could use internal resources and benefit from their company experience or hire resources from an external provider.
Given these options, the company chose to borrow people internally through a guest auditor program.
The Determining Factor
The need for guest auditors is not always identified during the annual planning cycle, according to Tyler. Instead, the internal audit department often identifies the need as the scope of individual audits is set.
“It is done when we realize we do not employ the appropriate resources within the department,” Tyler says. This need by the internal control group has turned into a benefit for people in other locations by expanding their work experience and on-the-job education, Tyler says.
People who participate in the guest auditor program usually have the opportunity to work overseas for two- to three-week stints. While helping with audit work, the guest auditors also learn how other areas of the Estee Lauder organization operate. They often return to their regular assignment with best practice ideas that they can help implement from an operational perspective, Tyler says.
Estee Lauder hosts approximately six guest auditors each year drawing from finance at corporate headquarters or affiliates. The company promotes the program by asking for potential volunteers at the start of the year for Sarbanes-Oxley (SOX) work as well as for non-SOX audits. Finance directors also recommend persons they believe would benefit from this experience. Some have also provided guest auditor assignments as a job perk to employees who are seeking more work-related travel.
“It works out to be a combination of the guest auditors helping us, and the department benefiting them from the experience,” Tyler says. “We place them on projects where they can best use their work experience since they work on the project for only two-to-three weeks. To throw somebody into something he or she is totally unfamiliar with would be unfair and frustrating for all involved.”
Tyler
says the company tries to have as little impact as possible on the local
offices that volunteer employees for the program.
In order for the program to be a success, “people in those offices must view the program as a benefit,” Tyler says. “We absorb all the travel and expense costs so the office locations sending a person do not pay for anything. That factor is important so they realize we are not asking them to bear extra costs.”
“The department they are from must be supportive because that guest auditor’s work must be performed by someone else for two-to-three weeks. You do not want that work to be ignored until the person returns to their normal duties. The in-charge person must allocate the work to the rest of the team as appropriate.”
A More Flexible Approach
Kimball International manufactures office furnishings and electronic assemblies and produces $1.2 billion in annual sales. Mark Hodell, director of audit and management services believes the guest auditor program is very flexible.
“We have utilized our guest auditor program for many years and advertise the program through various means. We mention it at financial leadership team meetings to ensure leadership involvement,” he says. “In the finance group, we require each team member to have a career development session every 12-to-18 months. That is where we often hear of guest auditor interest, from those looking for career development opportunities.”
Like Estee Lauder, Kimball International began soliciting guest auditors because the internal audit department required extra, specialized help at different times. Hodell says there is no doubt that SOX-compliance requirements have added to the need for extra help, but how much is difficult to quantify.
Hodell points out one risk of using guest auditors - the time required to bring the guest auditor up to speed. “In some cases, guest auditors are unfamiliar with the process being audited and definitely are unfamiliar with auditor’s techniques,” Hodell says. “We try to get them as comfortable as possible by inviting them to our planning meetings. This helps them learn why we are auditing certain areas as well as the significant risks in the processes. We then assign them tasks in which they already have some level of comfort. We will not assign someone to an inventory project if they have never had experience with inventory.”
To further ease their way into the work, Kimball’s internal auditors also provide guest auditors work papers from previous audits of the unit or process that is currently being audited. This also helps know what to expect during the audit.
Hodell says the company, as a whole, benefits from sharing information through guest auditor assignments. The company’s internal auditors typically have three-to-five years of experience on the job and little or no experience with operations. The auditors gain an operational perspective through their interaction with the guest auditors, and Kimball achieves a lower over-all cost structure since they do not have to retain specific technical abilities within the audit team on a full time basis. Instead, they get used on an as-needed-basis.
“It comes down to leveraging resources where you can,” Hodell says. “Several times, we have used guest auditors because we have needed someone to fill a void. On the flip side, we have had people express an interest in understanding the audit process, and we have incorporated them into areas where they had information and knowledge and could help articulate best practices. There is a lot of knowledge sharing both ways that is beneficial.”
A Useful Resource Option
At Brunswick Corporation, a leader in the marine, fitness, bowling and billiards industries, “the company has twice used guest auditors,” says Kim Roll-Wallace, vice president of audit. “We do not have a formal program in place. It is based on the work we need to accomplish. It is also a benefit having subject-matter expertise and business-side knowledge on these audits.” Roll-Wallace indicates Brunswick’s internal audit function is continually exploring resource options, and guest auditors are one of those options.
“We modify the audit schedule throughout the year based on our risks and then seek to augment our resources required for the work,” said Roll-Wallace. “It can be difficult to go outside the company and find people with the right level of engagement. Sometimes you are able to find outside resources with strong technical skills, but they are not necessarily as passionate about the work as your own employees.”
She said this is one of the reasons she is interested in guest auditors. “Guest auditors can give us a better end-product; with their seasoned experience and institutional knowledge, our findings and recommendations are more valuable,” Roll-Wallace says. “Another key is bringing people into the audit function to gain a better appreciation for controls, evidence and the audit process. They then bring that perspective back to their job. The more people out there with a control/audit mindset, the more you improve the overall control environment.”
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