Keeping an Eye on Culture Using New IIA Guidance
Blogs Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA Nov 18, 2019
One of the most valuable services The IIA provides is developing thought leadership that offers insight and foresight for internal audit practitioners. Such content is the culmination of efforts to gather and distill the latest information about issues that influence effective risk management, strong internal controls, and good corporate governance. Supported by a global network of knowledgeable volunteers who work in the internal audit trenches, The IIA creates content that peers into the future and informs practitioners about what they need to know to protect and enhance value within their organizations.
Another vital content component is formal guidance. Practice Guides, grounded in theInternational Standards for the Professional Practice of Internal Auditing and other components of theInternational Professional Practices Framework, reflect the natural maturation of practices and processes that were once cutting edge and have subsequently evolved into best practices.
And so it is with auditing culture.
Last week, The IIA publishedAuditing Culture, a new Practice Guide on a subject that has garnered a great deal of attention. Just six years ago, I wrote a blogpost that identified auditing culture as the new frontier for internal auditing. At the time, there was great debate as to whether internal audit could develop the requisite qualitative and quantitative skills to audit culture. I believe it is safe to say we are well on our way to answering that question with a resounding “yes.”
I also dedicated a chapter in my latest book,The Speed of Risk: Lessons Learned on the Audit Trail, 2nd Edition, to auditing culture. In it, I lament that the practice has been a long time coming for the profession.
When I launched my internal audit career, the idea of auditing the “softer” side of an organization's culture was anathema to the profession. Back in the day, it was believed internal audit should focus on hard controls, such as codes of conduct or human resources policies. Evaluating concepts as intangible as trust, ethics, competence, and leadership styles was something for psychologists and pop-culture gurus to worry about. In retrospect, a lot of heartache and failure across a multitude of organizations might have been prevented had internal audit taken on the full spectrum of culture 40 years ago. As it is, the concept is only now gaining mainstream acceptance among internal auditors and their stakeholders. All I can say to that is, it's about time!
The new Practice Guide provides a strong and practical approach to auditing culture, including directions on how to understand and evaluate the overall culture of an organization and assess whether subcultures exist. It helps internal auditors recognize risks associated with culture, how managing those cultural risks supports the overall control environment, and how to approach an assessment of culture.
The guide additionally delves into three key areas: recognizing the business significance of culture, internal audit’s role in auditing culture, and planning and performing culture audit engagements. This final section is of particular use to practitioners in that it includes considerations in planning, performing, and reporting culture audits; discussions on relevant Standards; and a number of useful tools. Finally, a short case study brings home how the different approaches to auditing culture can be applied in real-world situations.
We should celebrate the progress our profession has made in understanding and adapting our processes to the mechanics of auditing culture. But we still have a ways to go to truly influence how culture is viewed in boardrooms and C-suites. While our stakeholders have long acknowledged the value of a positive corporate culture and the importance of proper tone at the top, there remain too many instances of toxic culture contributing to governance failures.
It should be clear by now that good tone at the top doesn’t automatically translate to proper mood in the middle or buzz at the bottom. It also should be clear that internal audit must have a role in assessing, understanding, and explaining how culture influences good governance.
Finally, I should point out that access to Practice Guides, such as the newest on Auditing Culture, is an exclusive benefit for IIA members. If you are not an IIA member, you are missing out on a lot of valuable resources. Join today!