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The Key to an Effective Internal Audit Team: Communication and Direction

It's debatable whether any one role at a company is the most important. The CEO? Perhaps. The CFO? We'll be the first to say it's a vital role. What can safely be said is that every function within a company – whether it's the marketing department or finance – thinks those within it are doing the most important work.

This was an observation made by Michael Bechara, managing director of internal audit, risk and forensics firm Granite Consulting Group, during a recent Proformative webinar called "Seven Deadly Sins of Internal Audit." In truth, he said, every position carries value.

"We have a difficult job," Bechara acknowledged, speaking specifically about the internal audit function. "We have a very unique job. A lot of our job involves uncovering the truth. Separating fact from fiction and fact from opinion. We deal with a lot of complex issues."
Making the job more difficult is the lack of direction and communication the internal audit team often receives.

Internal Auditors Have a Difficult Job
Top decision-makers often struggle to figure out how they can improve their businesses, but they have a key resource available that they may not be fully using – the internal audit function. Internal auditors need to find their niche within a company and should be providing CFOs with data-driven insight for how the business can be improved.

"Many chief audit executives are always saying how they want internal audits to be more strategic, proactive and involved in the higher levels of discussions that are going on within the company," Bechara said. "We're going to have to understand how we fit in with the company."

The answer isn't obvious: To do their jobs effectively and independently, internal auditors need to keep a healthy distance from those they are helping – hence, the reason most companies give the IA teams a dotted-line oversight to the CFO (after all, who wants to tattle on their boss?). This makes internal auditors sometimes perceived as observers and not necessarily as people who could directly have influence on the success of a company. They often have to prove their worth.

Communication Skills Are Imperative
Internal auditors are given access to important business information, and they must possess the communication skills to help top decision-makers figure out ways to increase productivity and efficiency throughout the entire firm. Bechara stressed that CFOs won't be receptive to internal auditors who just throw large data sets at them without explanation or analysis. Internal auditors must harness this information and turn it into expert advice – and find a way to be heard.

Greater Value Is Expected of Internal Auditors
Bechara said internal auditors have the unique opportunity to allow businesses to perform an "independent assessment" of themselves. The head of IA knows the insights that CFOs and other top decision-makers need, and must deliver strategic advice that the company can really benefit from. Unfortunately, many internal auditors aren't providing the value that board members expect. According to PricewaterhouseCooper's 2013 State of the Internal Audit Profession Study, nearly eight in 10 high-ranking executives want strong insights from internal auditors, but only 56 percent said internal auditors are giving the insights that allow businesses to reduce their risks.

Internal auditors not only have to be masters of navigating massive amounts of information about finances and business processes, but also must be part of a tight-knit group where their advice is trusted by other members of the C-suite.

"It starts with relationships ... with senior management, company leaders and the audit committee," said Richard Chambers, president and CEO of the Institute of Internal Auditors. "This is a service function, and you do have clients. You do not subordinate your judgment, but you do serve."