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​It's Not as Bad as It Seems

Blogs Mike Jacka, CIA, CPA, CPCU, CLU May 14, 2019

I may have told you about this before, but indulge me — it provides a basis for what is to follow.

At Farmers Insurance, a significant portion of our work included reviewing operations within the offices of agents that handled all sales for the company. We performed reviews of up to 10% of our 17,000 agents. The reviews took half a day, so we would schedule one auditor to do one week of audits: 10 audits in a week. Crunch the numbers; that is a lot of agency audits.

The work was a little like the line about flying a plane — 99% boredom and 1% sheer terror. A lot of routine things: deposit your money on time, submit the receipts on time, run your agency like a business, don’t be stupid. And then fraud would rear its ugly head and all Hades would break loose.

Skipping the terror/excitement/fun of any fraud investigation, let’s focus on the other 99% of the work we were facing. Usually within a year of doing this type of work, the new auditor would come to me, frustrated. and say something to the effect of, “Why do we bother; nothing ever changes.”

Yep, nothing ever changed.

Except that the agencies learned a little more about how to run a business. Except that the auditors learned a piece of what it meant to be an agent within the company. Except that the department provided assurance to the company regarding the effectiveness of the agency force. Except that the department had identified a risk and helped ensure the company had proper mitigation in place.

Nothing every changed, except things were changing.

Nonetheless, every one of us went through it — that feeling that we kept finding the same things and the agency force didn’t seem to be improving and we were merely spitting into the wind.

I think we were actually lucky. Because of the volume of agency audits completed, I believe we hit that wall a little sooner than most internal auditors. But I’m willing to bet every auditor who has been around long enough to get his or her workpapers reviewed more than once has hit that wall.

Because it often feels like we are not making a difference. We do the work, we provide the information, we inform, we train, we provide as much value as we can, and we seem to still run into the same problems, the same issues, the same irritated audit clients, the same walls.

And that is just as true when we talk about the good and bad we see occurring within our own profession.

Last week, I talked about the 2019 North American Pulse of Internal Audit published by The IIA’s Audit Executive Center. I described what I saw to be an underlying message within the document, that a significant portion of internal audit’s primary customers still don’t know who we are, still don’t know what we do, and still don’t think we are doing our jobs (let alone doing it well/let alone adding value.)

On LinkedIn, Hal Garyn had a quite cognizant reply:

“I don’t think things are as bad as they seem from what The IIA and what the Firms publish sometimes. What is newsworthy is what needs to improve, so there is a natural tendency toward the negative in what gets published and promulgated. We need to keep challenging ourselves as a profession, and continue to improve, but things are not as dire as they get reported to be (at least in most cases). Yes, calls to action are needed … they will keep everyone honest and seeking continuous improvement.”

Thinking in terms of “The wall” — thinking in terms of how it seems things never get better — Hal is right. The headlines being reported are about the need for change. But, just as we at Farmers Insurance kept doing those agency audits, just as we felt we were not seeing improvement, and just as we wrongly assumed that nothing was getting better, internal auditors have to recognize (I have to recognize) that, in spite of the negative interpretation that can be deduced from some reports, the profession of internal audit continues to get better.

We are not what we were five/10/20 years ago. In fact, for a significant portion of the internal audit departments that are doing it right, we are not what we were last year. And that is the promise, the trend, and the future of the profession.

Of course, they are still out there — the audit shops that are not responding to what their customers need, the ones that are doing nothing but Sarbanes-Oxley/finance/compliance work, the ones that don’t work with the client to get corrective actions, the ones that feel their job is to find what the client is doing wrong. But that just means that the rest of us in the profession need to take the extra steps of identifying such departments, working with them, and helping them become better — helping them become more responsive to the future that will make for a successful internal audit profession.

Just as we at Farmers Insurance kept visiting agents — sometimes finding things going well, sometimes not, but always working toward making the whole better — every one of us in the profession must help raise every one else in the profession.

Internal audit is about making things better. Yes, it is about making our organizations better. But it is also about making ourselves better. And that includes recognizing the strengths right along with the weaknesses.

And we would all probably be amazed if we just started noticing how many strengths we’ve got going for us.

Mike Jacka, CIA, CPA, CPCU, CLU

Co-founder and Chief Creative Pilot, Flying Pig Audit, Consulting, and Training Services (FPACTS), based in Phoenix.