On the Frontlines: Labyrinth Threads in Board Dynamics
Blogs Jon Taber, CIA, CPA, CFE, CFF Jun 21, 2023
Embarking on a career in internal audit is much like navigating the labyrinth that Daedalus, the renowned architect in Greek mythology, skillfully crafted. Within this maze, audit leaders often run into unexpected twists and turns, complex decisions, and challenging situations — like the unwelcome Minotaur.
Yet, as the Greek hero Theseus conquered the labyrinth with the assistance of Ariadne, audit leaders may find their compass in the form of their organization's board of directors. Just as Ariadne’s thread guided Theseus out of the labyrinth, the wisdom and guidance of the board can navigate audit leaders through the intricacies of their journey.
Learning from the Board
Chris Patrick, CAE at Sunlight Financial, shared that powerful lessons from the board come from the questions they ask. Much like Coeus, the Titan god of intelligence and far-sight, board members’ inquisitive minds challenge audit leaders. In his own words, “I find value in those discussions, [in] the questions they ask. The questions really challenge me to want to bring more to the table.”
A fascinating example of this relationship comes from Tom McLeod, a seasoned audit leader from Australia, who recalls an interaction with an audit committee chair. In a meeting addressing a modest $40,000 fraud case, the chair's unexpected query about the investigation's cost sparked a pivotal moment. The investigation's total of $80,000 caused a wave of surprise, prompting the chair to impart a critical lesson. He said, "When you next have $100, I want you to spend $90 on prevention; $7 on detection and $3 on investigation.”
The committee also decided to use the fraud case as an employee training exercise, a decision that led to some surprising revelations. Despite explicit instructions in the training to look for fraudulent behavior, the average number of missteps employees identified was less than 20%, underscoring a gap in the staff’s understanding of fraud, even when they were instructed to look out for it. The committee praised the exercise as more valuable than an audit. Much like Hygieia, the Greek goddess of good health, the chair’s lesson to us all was that an ounce of prevention is worth a pound of cure. Tom's story underscores the immense value that a supportive board can bring to an organization.
Communicating with the Board
When it comes to interacting with the board, word choice is essential, a lesson deeply rooted in the myth of Echo, who was cursed to merely repeat the words of others. Kara Falco, director of internal audit at Casey’s, understands well the power of being selective with words, such as relaying to the board only what they “need to hear, nothing more, nothing less.”
Rob King, CAE at FedEx, adding to this thread of wisdom, emphasizes the importance of succinct communication, persuasive storytelling over monotonous slide-reading, and comprehensive preparation to tackle board members' questions. “Over-prepare so that you are ready for questions and discussions,” says King. “Anticipate questions from the board perspective. It will improve your performance and instill confidence as you build credibility and trust.” As Hermes, the messenger, can convey messages between multiple worlds, audit leaders must do the same, translating “audit speak” into business insights.
Maintaining Integrity and Diplomacy
Karl Stingily, the CAE at Caesars Entertainment, underscores the necessity of maintaining independence and honesty, characteristics displayed by Heracles. He highlights the importance of professional integrity in successfully serving as an audit leader, even during potential political implications. On one occasion, a former chair of the audit committee gave Karl direction that he personally disagreed with. In a bold example of independence, Karl remained steadfast in his opinion, despite the uncomfortable disagreement.
Sabine Charles, CAE at Touro University, shares similar insights. “At the end of the day, we have to communicate clearly and concisely and be able to present even bad news in a diplomatic fashion.” As Hermes had to employ diplomacy to negotiate between warring parties, audit leaders must be effective in communicating unwelcome news.
Collectively, these stories from the labyrinth of the internal audit profession illustrate the dynamics between audit leaders and the board. Each story adds a unique strand to the thread leading out of the maze. Like the mythical Greek labyrinth, the internal audit profession is filled with challenges, but with the right guidance and wisdom, we can conquer it and thrive.
Jon Taber will be moderating a discussion on board dynamics at The IIA’s 2023 International Conference in Amsterdam on July 10.