Views of Value and Competency How Stakeholder and Internal Auditor Perspectives Compare

Agenda Research Project Results ◦ Competencies ◦ Value ◦ Overall What Can You Do? CBOK 2015

The Project Sponsored by the Institute of Internal Auditors Research Foundation Championed by Larry Harrington, Vice President of Internal Audit, Raytheon Researchers: ◦ Vu Pham, Ph.D., Managing Partner, Spectrum Knowledge, Inc. ◦ Betsy Bosak, Ed.D., Partner, Spectrum Knowledge, Inc.

Research Questions How do stakeholders rate internal auditors on the competencies internal auditors use to do their jobs? How do stakeholders rate the internal audit activity on the value it provides? How do stakeholders’ perceptions compare to internal auditors’ perceptions about themselves?

Research Plan Surveys ◦ 2010 Common Body of Knowledge (CBOK) ◦ IIA’s Global Internal Audit Competency Framework Focus Groups ◦ Stakeholders – 12 participants ◦ Internal Auditors – 12 participants ◦ Validated survey questions ◦ Assisted in interpretation of results

Distribution of Responses

Analysis of Responses Scale: ◦ 1 = Poor ◦ 2 = Marginal ◦ 3 = Fair ◦ 4 = Very Good ◦ 5 = Excellent Categories ◦ Negative/Neutral (Poor, Marginal, Fair) ◦ Positive (Very Good, Excellent) Competencies Value Scale of 1 (No Extent) – 5 (Great Extent)

Competencies

Categories of Competencies General Behavioral Technical

Most Important Competencies Confidentiality (behavioral) Objectivity (behavioral) Communication skills (general) Communication (behavioral) Problem-identification and solution skills (general) Judgment (behavioral) Works well with all management levels (behavioral) Understanding the business (technical) Risk analysis and control assessment techniques (technical) Governance and ethics sensitivity (behavioral)

Highest-Rated Competencies

Most Important Competencies Confidentiality Objectivity Communication skills (general) Communication (behavioral) Problem-identification and solution skills Judgment Works well with all management levels Understanding the business Risk analysis and control assessment techniques Governance and ethics sensitivity

Lowest-Rated Competencies

Largest Gaps Understanding the Business Problem-Solving Skills Judgment Business Process Analysis Problem-Identification Skills Objectivity Data Collection and Analysis Tools and Techniques

A CLOSER LOOK AT THE GAPS

Understanding the Business Possible reasons: ◦ Different expectations ◦ Auditors not asking the right questions ◦ Communication challenges/barriers

Understanding the Business Ideas to address the gap: ◦ Better planning ◦ Relationship-building  What are management’s needs?  Communication ◦ Training and Development  Management – value and capabilities of audit  Audit staff – communication skills, business-related ◦ Auditor Rotation

Problem Identification/Solving Possible Reasons: ◦ Need for a better understanding of the client’s business ◦ Communications challenges/barriers ◦ Need to better collaborate on recommendations

Problem Identification/Solving Ideas to address the gap: ◦ Increased communications  Earlier notification and more in-depth discussion of issues ◦ Relationship-building  Collaboration on developing recommendations ◦ Training  Critical thinking – root cause analysis  Strategic thinking – data analytics, assessing data reliability  Problem solving

Judgment/Objectivity Possible Reasons: ◦ Not understanding the audit process ◦ Surprises in audit reports

Judgment/Objectivity Ideas to address the gap: ◦ Establish what can be expected  Audit Charter  Strong Entrance Conferences ◦ Routine communication throughout audit ◦ Issue Sheets  As issues arise

Other Lower-Rated Competencies Conflict Resolution/Negotiation Skills ◦ Training ◦ Practice Ability to Demonstrate/Promote the Value of the Internal Audit Function ◦ Participation on task forces ◦ Assignment to special projects ◦ Communications during audits

Putting the Results to Action Capitalize on the highest rated competencies ◦ What services can you offer that include these? ◦ How do you get the word out? Identify training opportunities for competencies rated lower

Perceptions of Value

IIA Value Proposition Assurance Governance, Risk, Control Insight Catalyst, Analyses, Assessments Objectivity Integrity, Accountability, Independence

Survey Questions To what extent do you feel the internal audit function adds value to your organization? To what extent does internal audit have visibility in your organization? To what extent is internal audit respected in your organization? Overall, how would you rate the performance of the internal audit function?

Adding Value Average Rating: Internal Auditors – 4.1 Stakeholders – 3.9

Improving Perceptions of Value Increase awareness and education Market the internal audit activity Highlight the highest rated competencies Gain support for audit activities from all levels of management

Improving Perceptions of Value Improve communication Build client relationships Provide practical solutions

Visibility Average Rating: Internal Auditors – 3.9 Stakeholders – 3.9

Increasing Visibility Obtain a “seat at the table” Market the internal audit activity Make audit reports available to staff Build relationships Get audit staff involved

Extent of Respect Average Rating: Internal Auditors – 3.6 Stakeholders – 3.5

Gaining Respect Deliver Build awareness of senior management’s support Improve perceptions throughout the organization’s culture

Gaining Respect Stress the importance of internal audit in management training Increase education and awareness Relationship building Training

Overall Performance

The Bottom Line Leverage strengths related to confidentiality, ethics, and professionalism. Enhance skills and communication related to understanding business, solving problems, objectivity, and judgment. Continue to build recognition.

Some Things To Think About Is this reflective of what you would see if you compared your ratings with your stakeholders? How can some of these gaps be reduced? How can some of the lower rated competencies be strengthened? What else needs to be done?

What Can You Do? Administer a similar survey – to your stakeholders and internal audit staff Identify and capitalize on your strengths Develop goals and action plans to address areas identified as weaknesses Incorporate the information into your annual internal assessment

CBOK 2015 Practitioner Survey open until 3/27 ◦ Google CBOK Resource Exchange Planned Deliverables: ◦ Core Reports ◦ Fast Facts ◦ More In-Depth Looks ◦ Database for Future Research

Any Questions? Contact Information: Karin Hill, CIA, CGAP, CRMA Director of Internal Audit Dept. of Assistive and Rehabilitative Services