Management Needs: Internal Audit’s Operational Approach(1)

Source:Brink Modern Internal Auditing

INTERNAL AUDIT’S MANAGEMENT FOCUS
Starting with the first edition in 1942, this book has continually emphasized that
service to management should be the major mission of internal audit. In the earlier
days, this internal audit mission objective was fairly narrow and emphasized
more the needs of middle to senior management, such as a financial controller
interested in the controls covering accounting processes. Over time, this internal
audit mission has been broadened to cover the board of directors, stockholders,
all levels of employees, government, and society. The controlling mission of internal
audit today is service to the overall organization, including those responsible
for its governance. However, that mission still must have a strong internal management
focus. While the recipients of internal auditing services have special
needs, management effectiveness is often the most major concern. If an organizational
unit is not well managed, everyone associated with it suffers. At the same
time, management’s tasks are becoming more complex because of a rapidly
changing worldwide environment with regard to changing technology, markets,
regulatory factors, and societal values. These factors make it important for internal
audit to take a broad approach to the concept of service and assistance to the
organization at every level and in every way. In order to properly assist management,
an internal auditor must continuously strive to understand management
needs, in terms of both general concepts and the unique characteristics of a particular
organization. Auditors need to understand some general concepts of management
theory and processes, how managers set their objectives, and how they
identify and solve problems to achieve those objectives. All internal auditors

MANAGEMENT NEEDS: INTERNAL AUDIT’S OPERATIONAL APPROACH

must learn to think like organization management in order to form partnership
relationships and communication links.
Another important reason to understand management theory and practice is
that internal auditors themselves are managers. Their roles include supervising
audit projects and directing overall internal audit tasks. Internal auditors must
be able to develop objectives and strategies to achieve those objectives, working
through people and with other resources, just like other managers. Auditors
cannot be qualified counselors to management if they cannot effectively manage
their own operations. Internal auditors should provide a model that can be
observed and followed by others in the organization. In this way, internal auditors
will also be viewed as likely candidates for other management-level positions
in their organizations.
This chapter considers some of the more general concepts of management
and also discusses communication techniques that will help an auditor gain a
better understanding of management needs. This chapter should be read in conjunction
with other audit management chapters such as Chapter 4, “Internal
Controls Fundamentals: COSO Framework,” and Chapter 14, “Directing and Performing
Internal Audits,” among others. Effective internal auditing involves
understanding management needs and working with management to serve
those needs. That understanding is an essential ingredient for establishing internal
audit credibility such that management will respect and listen to internal
audit’s counsel. Working together, managers and internal auditors can achieve
increased effectiveness and promote overall organizational welfare.