At the 2024 Internal Audit Conference, I heard the CAE at Nationwide talk about the need to move away from methodologies that merely add up our internal audit findings to produce a formulaic answer. I came away thinking about how the internal audit profession is evolving.
These thoughts turned into wider reflections as I went through the Chartered by Experience process and prepared for my assessment. What does using our professional judgement mean in practice and is it the start of the internal audit process or the end?
For me, these elements are interrelated. A formulaic internal audit approach impairs our ability to give an independent view and exercise our professional judgement. There are clear links here with the explicit requirement in the Global Standards to exercise professional courage and give our independent assurance opinion without fear of retribution. We must also be sceptical – so we scrutinise both what we are told and our own preconceptions.
CAEs are the eyes and ears of the board and have an obligation to challenge management. But we must challenge reasonably. First and foremost, we need to have something relevant to say.
If we are not performing high quality, relevant internal audit work, we won’t have all the facts. Without the facts, we won’t gain the insights on which to base genuinely useful recommendations. If we don’t have useful recommendations, we have nothing to exercise judgement over.
We also need to be heard. Effective challenge is extremely difficult without the full support of the audit committee and a reporting line that is independent of the board.
A strong quality assurance improvement process (QAIP) is another vital component. If we do this well, we constantly improve and tweak our methodology and learn from each piece of audit work.
So, fundamentally, professional judgement is underpinned by high quality work, the ability to make ourselves heard, plus a great QAIP process.
Lastly, we must remember that we work within a process. Our plan is agreed with the audit committee. We can change it, but we must justify why we do this and on what grounds. We must be able to justify our choices and take responsibility for them.
Professional judgement therefore comes at the start of the process – when we form a plan. It continues through the middle of the process – when we identify what is important. And we must use it at the end – when we select where and how we should communicate our conclusions and whether we need to challenge anything.
Professional judgement doesn’t come from nowhere. It is a skill that needs to be honed with practice and tempered by experience. CAEs therefore need to encourage people in their teams to develop these skills.
We also need peers and team members to challenge us using their judgement. We never stop learning and I need people who can challenge me – it’s good for them and good for me.
It can be hard to create a culture in your own team that actively prompts people to speak up. CAEs must make sure that people (particularly direct reports) know they can come to us and are not put off by layers of process. Then we must make time to listen.
This is part of treating everyone in the internal audit profession with respect and acknowledging the expertise behind their views and their professional judgement. If we don’t do this, we can’t expect others to do this for us.
One of the attributes I try hardest to retain in the team and to identify in new recruits is the ability to form an individual point of view and to express this constructively and courageously.
It’s important that this is not confused with being opinionated. Someone can be quiet and reflective but also have an independent viewpoint and be confident about expressing this where necessary. Leaders must spot the people whose views are most worth hearing and give them the confidence to speak and be heard.
After all, we rely on the people in our teams who can form an opinion that goes beyond repeating their findings. Our judgement comes from their judgement. We get our information from people who are equipped to focus on what their findings mean and are confident enough to have an informed opinion on what could be done about them.
The Global Standards tell us that internal auditors should take on more consultancy work and that we must develop what we do to stay relevant. This also requires careful judgement because it must be proportionate. We must think carefully about what we call out and how we do it.
What makes internal audit eternally interesting is that there are multiple different approaches to ratings and management actions. In the end, it all comes down to judgement, because there is no one way to do things well.
Read our article on what do you get from becoming a Chartered internal auditor?
