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10 Signs Trouble May Be Brewing for the CAE and Internal Audit

Blogs Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA Feb 17, 2020

​For more than 20 years, I have been cautioning chief audit executives (CAEs) to always be attuned to signals from their stakeholders, whose expectations can vary dramatically from one organization to the next.

Every CAE must continuously review current and potential stakeholder groups and reassess their needs.

As swiftly as expectations can change based on risks to the organization, there are also telltale signs that internal auditors may not be getting the full picture. I have learned that there are signs — some big and some small — that stakeholders may be unimpressed or even unhappy with the leadership of the CAE and the value provided by internal audit. 

I first offered my top 10 signs that stakeholders may be unhappy with internal audit in my very first blog, in 2009. I continued to share my view on stakeholder perspectives, most recently in my latest book, The Speed of Risk: Lessons Learned on the Audit Trail, 2nd Edition, published in 2019.

I believe that waning support for internal audit is an inherent risk we face as internal audit leaders. For that reason, here is an updated list of “10 Signs Trouble May Be Brewing for the CAE and Internal Audit.”

  1. You are executing an annual audit plan developed from a risk assessment conducted six months earlier, you have no mechanism for identifying new or emerging risks, and no new audits have been added in the past two months.

  1. Management and the audit committee are surfacing more new risks to you than you are to them.

  1. Audit committee members are citing with increasing frequency “best internal audit practices” they observe in other companies on whose boards they serve.

  1. You are getting a lot of pressure from your stakeholders to undergo an external quality assessment that is past due. Worse yet, they insist that an external quality assessment be undertaken earlier than the five-year interval required by The IIA’s International Professional Practices Framework. A case like this surfaced recently in Dallas.

  1. Directions that your budget/staffing be reduced are coming from the CEO or chief financial officer, and you are not even being asked about the impact. What’s more, the audit committee is expressing no concerns about internal audit staffing reductions.

  1. You find yourself on the audit committee agenda with less and less frequency, or you notice that audit committee members use your presentation time to catch up on emails or take a bathroom break. 

  1. Your stakeholders are hiring outside service providers to undertake projects that internal audit is capable of executing.

  1. You announce your retirement, and the CFO or CEO move quickly to reassign an executive in the company with no internal audit experience as your replacement, overlooking highly qualified internal audit leaders from your department, whom you recommended.

  1. The CFO or CEO controls the audit committee agenda and tells you what you can or cannot present at meetings. They also insist that any calls you make to the audit committee chair be run by them first for approval and that you must report back on the content of the call. 

  1. The CFO or CEO asks you if the company “really needs an internal audit function.” 

I updated my list by asking recent CAEs for further insight and examples. Their input was eye-opening. I am sure there are countless other signs pointing to a loss of stakeholder confidence in, or support of, internal audit. I welcome you to share them.

Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA

Former president and CEO of The IIA, the global professional association and standard-setting body for internal auditors.