Building a Better Auditor: Through the Auditor's Lens

Opening a futsal court seems like a promising business venture for two sports fanatics. However, before taking the plunge, I advised them to create a contingency plan to navigate potential disruptions, as their business location posed several inherent risks.

For instance, during the Muslim festival of Eid ul Adha, the area turns into a cattle market for about 15 days, making it impossible to operate. The low-lying nature of the area could also cause rainwater accumulation, damaging the court. Security concerns arise due to the location on the outskirts of town, and managing influential local politicians is essential to avoid business risks. Moreover, during the month of Ramadan, when people fast, there could be a decline in business. The contingency plan could include measures such as adjusting operating hours, managing cash flow, and exploring alternative revenue streams.

Further, my advice was to conduct a comprehensive market analysis that would help fine-tune their marketing and pricing strategies, optimize their product offerings, and clarify consumer behavior, potential competitors, and demand.

I also emphasized the significance of financial controls and procedures, including budgeting, forecasting, cash handling, and reporting. Maintaining accurate and reliable financial records would enable them to optimize their resources and make informed decisions.

After our discussion, I proudly declared myself an internal auditor! Internal auditors possess a deep understanding of business, strategy, risk, and control, which is essential for improving operations and leading the organization toward success. My friends understood my audit instinct and appreciated my feedback.

The perception of our profession often remains clouded. Many people associate the role of an internal auditor with merely safeguarding assets, reconciling bank statements, counting inventory, and ensuring compliance with rules. However, auditors can leverage success in every aspect and function of the organization with adequate resources, independence, and support from management and the board. Some of the ways we do this include: 

Identifying and evaluating risks. Effective risk management is a collective effort and necessary for the sustainability and success of an organization. Unfortunately, some companies have failed to prioritize this, leading to unwanted consequences. This is precisely where internal auditors come in. We play an important role in identifying, evaluating, and prioritizing an organization's many risks, including financial, operational, compliance, reputational, strategic, IT, fraud, and information security risks. By doing so, we create value for the organization by helping to prevent or mitigate risks before they become significant issues.

Improving processes and efficiency. As internal auditors, we can closely assess many areas within the organization. We engage in benchmarking with best practices, analyze data and metrics, and employ process analysis. These methods allow us to extract valuable knowledge so that we can solve problems and identify opportunities for enhancement. By identifying inefficiencies and recommending improvements, our focus is on simplifying processes, maximizing productivity, and ensuring the organization operates at its utmost potential.

Enhancing internal controls. In today's fast-paced world, organizations are experiencing rapid transformations and navigating new and emerging risks. When progressive companies encounter challenges in maintaining control over their operations, management often finds it necessary to raise the bar of risk tolerance. In such situations, the role of internal auditors becomes pivotal. We are responsible for testing controls and providing valuable insights into how the organization effectively manages and mitigates risks that could potentially hinder its goal achievement.

Providing objective and independent advice. Being uniquely positioned within the company, we offer valuable insights and recommendations. Our commitment to maintaining objectivity and independence ensures that our perspective is unbiased, enabling management to make informed decisions and enhance organizational performance.

Ensuring compliance. In many industries, especially regulated ones, there is a high compliance risk that merits attention, as violations of compliance can lead to serious consequences. We assess the organization's adherence to applicable laws and regulations, industry standards, and internal policies and procedures. We provide reasonable assurance regarding whether the organization is adhering to compliance as intended. We also identify gaps, make recommendations, and promote an ethical culture within the organization.

In the pursuit of success, we auditors face challenges, setbacks, and failures, as there are always new risks and obstacles to overcome. However, what truly matters is our courage and determination to keep moving forward and strive for continuous improvement and organizational growth. Looking ahead, I firmly believe that organizations — from the smallest local sports venture to the largest multinational corporation — will increasingly recognize the invaluable contributions of internal auditors to their overall success.