How many career-oriented internal auditors have you come across yet or expect to see in future? Chances are far too less or more appropriately hardly any!
One could always find people working as operational managers (finance, engineering) having held internal audit positions in the past, or internal auditors presently always keeping an eye out for a role in operations. It’s not because of ambition, mind you, but because internal auditing is all too hospitable!
Hospitable……to the extent of itself being disadvantaged. Internal Audit is always used; in fact, misused as a launchpad for people vying for slots in operational roles. The Institute of Internal Auditors, the global voice of the internal auditing profession, has always required availability of all desired competencies as part of the internal audit team.
Whilst this flexibility has been one of the key hallmarks of the internal audit standards meant to translate into an effective and competent conduct of internal audit engagements, this has also resulted in internal audit teams being composed of part timers or parachutists; people who possessed all those other competencies but the core internal audit acumen!
The launchpad behavior is because of external auditing. External Auditing has always been a service provided by audit trainees looking to ignite a career in finance. So, it’s not unfathomable that internal auditing is also perceived to be a service line frequented by people who consider it as a training domain, rather than a career line.
In my experience there are 4 main reasons: 3 of them being merely arguments for the sake of arguments and 1 being real.
The argument ones are:
- Internal auditing is not a core domain. It’s a gig well suited for trainings. Therefore, all auditors have and should move to their core career line at some point; the sooner the better! Thus, training expertise is enough to help improve the Governance, Risk Management and Control (GRC) systems.
- Auditing skills do not require dedicated learning. Anyone can acquire reviewing and verification skills while on the job as if there’s a typical approach to auditing. Thus, the operational managers can do the auditing part themselves.
- Internal auditing is not a full-time job. No one should just be doing audits. Taking on additional responsibility is imperative for career progression. Thus, once the audit universe is fully covered, auditors should take on greater responsibilities.
You don’t need to read between the lines here to understand what all these arguments represent. It is obvious that the arguments stem from the perception built around internal audit which can’t tell it apart from the engagements / projects based external auditing.
Throughout my professional journey till date, I’ve faced the first and the last of these arguments as a bid to curtail my progression, in terms of promotions, increments, etc. But had they deterred me from representing what I am? We’ll see that in a while.
But first, the 1 real reason:
- Compensation: Internal Auditors are paid significantly less than their operational counterparts, most noticeably in Finance.
As has been unearthed in the latest Pulse of Internal Audit annual report by the Internal Audit Foundation and analyzed in detail by Richard Chambers (ex-CEO and president of the Institute of Internal Auditors) in his blog here, the internal audit profession lags in compensation and cyclically is unable to retain commitment and dedication of talented resources.
I would go beyond this analysis and add that the compensation is purposely kept below the operational managers compensation because:
- It is perceived that internal audit is a cost center.
- It is perceived that operational managers have a lot more responsibility.
- It is thought that less than market compensation would keep the audit under duress, so that it could be influenced.
Let’s now take all the reasons (mere argument ones and the real reason) head on:
|
Internal Audit |
Response |
|
Is not a core domain |
Internal Audit has carved out a specialized domain for itself; it’s called the GRC. Plus, why the engineers, accountants, or professionals from other service lines then need to frequent it? |
|
Does not require dedicated learning |
Several specialty certifications in internal auditing, risk management, internal controls, IS auditing and risk management are now globally available and sought for, especially the flagship CIA offered by the Institute of Internal Auditors. These represent dedicated learning requirements. Why exactly do professionals from other service lines have to gain audit experience even through training opportunities? |
|
Is not a fulltime job |
Even a static audit universe requires continual assurance engagements. But audit universe is anything but static. An evolving audit universe is based on the fluid risk universe of a growing or even a dying business. The need for assurance and focused consulting engagement never stops evolving. Is there any service line that could offer an independent and objective coverage of the entity’s risk universe? |
|
Is a cost center |
Only when it’s driven through a myopic scope, fixed predetermined service methodologies and an inflexible audit approach. Consult here. Clients’ lack of understanding of what internal audit can do or does is to be blamed. |
|
Represents lesser responsibility in comparison with operational managers |
In fact, business operational managers are only specifically responsible for their own domains. Internal Audit reviews encompass all business domains as established in the audit charter. Just don’t apply scope filters; internal audit is the audit of everything! |
|
Needs to be maimed through lesser compensation |
No comments! An easily influenced internal audit function will perform sub-optimally and unprofessionally and will also be entirely ineffective rendering even a minimalist investment useless. |
Now onto what I faced and how I navigated through it.
In my first employment, after having experienced regular promotions till the rank of senior manager, I was told that I also needed to take on the reigns of operations department that was responsible for all policies and procedures in the Company and the employees performance management if I wanted promotion to the next grade of Country Manager.
My response: I found a new opportunity for diversification and growth within a massive industrial sector and moved on.
In my second employment, my compensation was kept way below my peers in the same rank, even less than the average of the two grades below my administrative rank despite having secured regular promotions and winning additional responsibilities. The client took comfort in the fact that the bare minimum or the stipulated requirements stand fulfilled with a sub-optimal investment in the internal audit function. Desired talent retention was not their forte!
My response: Yes, you guessed that right!
Throughout my career, I was asked not once or twice, but multiple times and by friends, colleagues and well-wishers alike to move to the core finance role to enjoy greater compensation, rewards and benefits.
My response: I thanked them for their sincere advice, but I stood my ground by fortifying my relationship with internal auditing even further. I continued my internal audit centric specialty certifications spree to continue to evolve professionally, be more marketable and even help with my professional memberships, CPD requirements.
I decided that I needed to be loyal to my career choice, not to the sector of the industry my employer operates in! I will go where my career choice takes me and I am willing to fully embrace whatever that entails! If you’re in the internal auditing for getting a knack for it, let it define you and then enjoy the wonders deeply entrenched in the commitment.
Embrace internal audit as a matter of faith and when you do, have faith! Persevere even if something must be forgone in the short term. You’ll have a purpose worth fighting for!
Some words to the wise too!
The custodians of professional accounting and finance membership bodies need to consider leaving the auditing profession alone.
And if it’s a big ask, then let’s experiment: if external audit experience is still preferred for roles in accounting and finance then maybe we should consider internal audit experience for acquiring business acumen and commercial sense, through its risk mitigation and controls improvement advisory and its costs versus benefits approach embedded throughout in the internal audit way of life!
And when we do that both the internal auditing and the business management will be able to complement each other!