When evaluating communication, the internal auditor should be aware that nonverbal communication

One of the key elements of success for an Internal audit function is Communication. An internal auditor is constantly engaged in conversation with various stakeholders, be it Internal or External. It also includes both verbal and non-verbal. The following simple list gives an idea of the wide spectrum of people, an Internal Auditor needs to communicate with:

1.      Audit Committees- which comprises of members from varied backgrounds, knowledge and expertise in the business and finance operations and the Industry. The Communication includes IA plan presentations, discussion around various risks given the changes in business environment, the audit report presentation etc.

2.      Senior Management Executives- comprising of Chief Financial Officers, Company Secretaries, Chief operating Officers, HR heads, Legal heads and of course most important being the CEOs.

3.      Process owners- They vary from process owners who are in operations to being subject matter experts in senior functions and from both Finance and Non-Finance backgrounds. Some would understand the audit process, some may not.

Next important thing being how much time is available for an Auditor to communicate with the above-mentioned stakeholders. It ranges from few hours to few minutes.  

While, the scope of this topic is very wide, would like to summarize on some of the points to be noted for an effective communication.

General points.

1.      Any presentation/discussion is effective if it is around the activity/process, rather than who does it. This will ensure the required focus address an issue.

2.      When, a sample size is mentioned as data backup for a point in consideration, stakeholders would like to see the percentages or number of instances vis a vis the populations size. This gives Focus on risk and enables stakeholders to appreciate the point and take a decision.  For instance, 10 out of 100 instances or 20% out of total count of 50,000-transactions etc.

3.       Internal Auditors should give a sense of assurance to the process owners that the intent is not to find fault but to improve the process efficiency and controls and in the best interest of the entire organization.  This should be demonstrated in the way an Internal Auditor talks to people.

4.      In a matured organization, the process owners would be the best judge to improvise their process, the internal auditors should complement them with some best practices and Industry benchmarks. 

Below are some of the points to be noted while discussing with the respective group.

Audit Committee:

1.      Internal auditor should have a complete view of the points to be discussed and focus on those which really calls for attention from the audit committee, else the point would be defocused.

2.      Would need a background of the process and discussion around recommendation to be elaborated, as that would enable the AC members to supplement with their views and guide the company.

 3.      It is important to give them the industry view and as to how the company being audited is placed in the Industry, so that they can provide their guidance.

 4.      Given limited time, it would be effective to provide them an overall summary, the key points which need their intervention/guidance, and provide them inputs as to what company proposes to remediate the observation. Classification of observations into High, Medium and Low or Critical and Non-Critical helps in getting the desired focus and inputs from the Committee.

5.      Flagging the repeat observations in the Internal Audit Reports helps the Committee to dissect the potential weakness and drives the tone of the top to resolve the issues quickly.

Senior Management:

1. Normally this group likes to get an insight on what is working fine and what is not. A verbal communication apart from the report would be required at least once a quarter.

2. They would be aware of the process to an extent but need a detailed explanation from the auditors, which will help them get an independent view.

3. They are also evaluating the auditors and hence needs to have a detailed understanding of the process updated and help them with peer practice.

4. The buzz word these days is automation and data analytics. This group would be interested to know as a value add from the audits, as to what can be automated etc. So internal auditors should make it a point evaluate automation opportunities and present them to the management.

5. A formal meeting with senior management apart from the audit reports is important to get their view on various issues the company or the industry is facing, so that some best practices would emerge as part of these discussions.

Process owners:

1. Key point of communication with this team is to listen more. The more internal auditor listens and understands, it is better.

2. Art of questioning- here auditor need to upskill with the art of questioning, which will help in understanding the process and controls.

3. This team knows the process better and it is always better to constructively debate on the possible solutions/control, recommendation so that it will enable the auditee to appreciate and implement.

Though a successful Internal Audit encompasses understanding of process, subject knowledge, deep line approach, alertness to possibility of frauds and other risks, the art of communication remains to be an indispensable part for success of any Internal Audit. 

As mentioned earlier, the topic is wide and have covered only few important points. Would be glad to get your comments and experiences.

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