My best friend ran a car dealership for years and he observed that customers almost never bought a car without thoroughly inspecting and driving the vehicle. This makes sense. When making a purchase as large and expensive as a car, we want to inspect for ourselves and kick the ole tires so to speak. This practice of seeing for ourselves is not new and has been our own litmus test to assess quality and value. The internal audit world has this practice too, it just isn’t as obvious. The ever quoted, “trust but verify” is built into an auditor’s DNA – to not rely too heavily on others to provide any sort of assessment.
Some disrupters are more obvious than others on this. Carvana launched a business in 2012 where the entire used car buying process is online and turned what was unthinkable, to buy a car without seeing for yourself, has become a reality. This has also provided credibility to the notion that we can trust others to do the tire kicking for us.
The pandemic has also been a disruptor and has challenged our thinking for how we can deliver internal audit work. I have been amazed at the effectiveness of virtual meetings and screen sharing / screen capturing for conducting meetings, obtaining support and delivering results. I think the use of technologies such as Zoom, Teams and Webex have greatly increased the value of remote work. The full adoption of these technologies in the business community is long overdue and the awkwardness of video calls has faded with practice. I’ve found that you can still build real relationships through virtual meetings!
So how does this translate to internal audit?
On-site inspection of audit processes has been the basis for effective internal audit work. Take a warehouse audit for example, it is difficult to see how inventory is organized without physically observing the process. A report can show that there are X number of items in a bin but what if that bin also has co-mingled items, or the label is missing or the receiving area has a massive pile of unprocessed damaged goods / returns. These are things that cannot be observed over a Zoom call and are central to adding value during the audit. These are the kicking the actual tires moments.
Over the past several months, I have made a shift in how I deliver audits due to our current environment. Auditors first need to review their audit plans to determine if audits can be performed remotely, in-person or a mix of the two. There may be audits that can easily be performed remotely such as financial or IT audits while operational and performance audits require in-person time. Here are a few tips for this change in approach:
- Technology! – For audits requiring on-site time, spend more time using technology to perform detailed walk throughs of each process in-scope before arriving on-site. This is the time to work out the details on specifics and to be sure that your request list is accurate and comprehensive. This sounds simple so it is easy to overlook. Early in my career, I would arrive on site with the agreed scope but the auditees didn’t know what they should have prepared, we had not discussed each process area in detail and this resulted in inefficient on-site time learning what they actually perform and identifying the correct process owners. Through the use of better planning with technology prior to arrival, the on-site time can be used to observe physical processes, conditions and anomalies and this is where a trained auditor adds the most value.
- Personality for the win! – For audits that are 100% remote, don’t forget a bit of small talk with your auditees on your Zoom call and to smile, they’re people too! This will go a long way to building a trust relationship with them and their receptiveness, when discussing your findings and recommendations, will increase. Also, have you ever looked at yourself on Zoom? I renewed my driver license a while back and I remember thinking, this is a big smile for me when my picture was being taken. However, when I got my picture back, I barely had any sort of discernable smile! I needed to really exaggerate the smile for it to be recognized and this goes for Zoom too.
Has there been a drop off in value provided during an internal audit when using technology? If auditors rely too heavily on technology, the value could drop off. My audit approach has been to look for ways to balance both the remote work with technology and in-person work to achieve maximum efficiency and value for my clients. The efficiency gains I have observed from increasing technology usage have been tangible. For the internal audit profession, there continues to be a need to kick the virtual tires and the actual tires.