Auditing Success

INTRODUCTION: WHY DOES AUDITING EXIST?

Why does auditing exist? It is a classic question new auditors ask when starting in the profession.

As a manager, it is important to be able to explain why auditing exists and the function it plays within the firm.

According to the IIA Standards, “Internal audit strengthens the organization’s ability to create, protect, and sustain value by providing the board and management with independent, risk-based, and object assurance”.

This playbook takes a more holistic view of managing risk in an organization. Risk is generated when an organization takes on any activities to generate value. This could be sales, marketing, or even compliance. To manage risk the three lines of defense model exists. The first line typically generates risk by generating revenue. An example of this would be a wealth management group or a sales group selling financial products. The first line generates risk through the offering of a financial product and ensuring delivery to the client. To control the risk appropriate controls (policies and procedures) must exist to mitigate that risk. The second line provides the first line with additional risk mitigation programs. This could include risk and control self-assessment, business continuity plans, and privacy policies. The second line is responsible for risk management and helping the first line implement risk management practices. Finally, audit which is the third line. Which is responsible for reviewing the controls to ensure that there is no unmitigated risk.

Audits as the third line of defense help promote accountability, transparency, fraud detection, compliance, and risk management, and help support decision making across the enterprise.

Auditors play a key role in pulling back the curtains for management and helping the organization create visibility. Ongoing audits provide opportunities for process improvements, control enhancements, or business opportunities.

As audit leaders our job is consistent across 90% of audit shops. It is our responsibility to identify how this book can apply to our organizations.

The rest of this book will highlight how audit leaders can use a common playbook to drive specific qualities in our teams:

• Proactivity
• High Performance
• Positivity
• Transparent Culture