With so much talk this week about food standards and safety making us all go ho(a)rse (sorry couldn’t resist!) I thought it might be appropriate to reflect on something put to me by a colleague. It was this, the idea that CAEs are perhaps uniquely in a role that benefitted from periodic change.
I’m sure we’ve all heard the argument. We as auditors lose our independence and objectivity progressively the longer we work with a client. It is this premise that enforces external auditor rotation, that prompts us as internal auditors never to re-review something we’ve looked at (or at least to try to avoid doing so).
Now I’ve never bought that argument. First because I think that internal audit objectivity and independence is a state of mind not a contractual or other relationship. Whether we’re paid by the organisation as employees or paid via a client contract we are all dependent in some material fact on our clients. In fact I have always regarded the concept of customer orientation, something professional services firms do well and to their credit, as a far more powerful driver of dependence than any employment relationship. Second there have been very few audits in my life I could not have done better second time around, with more experience, understanding and context-specific knowledge. Indeed for complex audits whether as an external financial statements audit, or internal auditor, I would argue a long period of client-specific CAKE (cumulative audit knowledge and experience) is required even to do a competent audit. Third, I have been quite capable, given a suitable time gap, to challenge my own work and see it objectively, normally using information and data I have obtained or improved my understanding of since the last time I performed the work. Simply put, audit independence is a state of mind and an attitude which can be lost in the first instance or after many years, the time lapse is not relevant in my view.
So then, the other element to this sell by date argument, that it is unique to internal audit. Well again I think not. I have seen at my clients over the years many functions and departments benefit from new leadership. Indeed some I have seen improve incrementally under successive new leaders with each taking the function ‘as far as they could’ before moving on. Internal audit is not unique in that regard. Equally I know of many internal audit functions whose leadership has not changed in over 10 years. Does this weaken them? Are they led progressively badly, poorly, and have they lost their independence? No, not really. Indeed one consistent theme amongst my audit colleagues is that we are always in the middle of challenge and change. Most I have met have a childlike fascination for the new, the challenging, the different. It is one of the things about the profession that drew me to it. The chance to cover all corporate functions, to move on when bored of a particular subject, to learn, everyday, at work. For my colleagues in roles for long periods of time I have often seen a greater emphasis on periodic renewal, periodic service review (as prescribed by our institute). I have not seen such a conscious effort in my finance, marketing, IT, HR and other colleagues.
So perhaps I would turn the argument on its head. Yes the danger of stale dependence has perhaps a more significant, even fatal, effect on efficacy of an internal audit function, but that is not unique to internal audit. I believe that in fact it is much less likely to occur due to the DNA of conscious independence woven into the fabric of our professional beings and lives.
So then, have you reached your sell by date?