Relationships and Risk Insights from Stakeholders

Agenda CBOK Stakeholder Study Primer on “Critical Non-Technical Skills”

About the Stakeholder Study 13 Languages Global Interviews 100+ IIA Institute Partners 23 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. www.theiia.org/cbok

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. General Themes 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: Stakeholders agree or strongly agree that internal auditors: Assess areas or topics that are significant. Keep up to date with changes in the business. Sufficiently communicate audit plans.

Expectations to Move Beyond the Basics

The clear answer is “risk” Beyond Assurance Many respondents note that they see value in advisory services. What should this non-assurance work cover? 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? 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

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 out-group 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-sociology-textbook/social-groups-and-organization-6/types-of-social-groups-53/in-groups-and-out-groups-338-10455/

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 in-group 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 Know successful: people are asking for your advice,

The 3 Stages of Auditor Self Awareness You might be wrong No! You might be wrong Maybe I might be wrong IA IA 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 Define Your mission Internal Auditing Align Audit objectives Business objectives Explain Your purpose Audit process What’s in it for management Understand Management’s expectations Attitude toward being audited Collaborate Assessment of risks and controls Root cause analysis Action plans

Question Jim Pelletier, CIA, CGAP Vice President, Professional Solutions jim.pelletier@theiia.org