11. Human resources: Do turnover metrics in divisions indicate risks yet to surface? (Often times employee departures indicate underlying problems.)
12. Technology: Are systems sufficient to ensure consumer data privacy and quality of management information for proper decision making?
13. Customer service: Are systems sufficient to keep management informed concerning customer feedback and satisfaction levels?
14. Credit/receivables: Have credit due diligence standards remained strong in the current economy or have they slipped in order to increase sales?
15. Vendor/supply chain: Are systems sufficient to know the risk within the companies who are in the supply chain and how their risks might impact the company?
16. Physical security and natural hazard: The Once in a Thousand Years event has somewhat sped up its frequency. Are business resumption procedures regularly tested?
17. Valuations: What percentage of the balance sheet is valued by financial models? What is the strength of the model validation procedures utilized?
These 17 audit reports should be summarized into one-page reports for ease of reading, with detailed information provided upon request. Each summary should include methods used, findings, proposed action and expected results.
This format will be a valuable and time-conserving addition to both the senior management of your company and the board. It will allow the audit group to attract an entirely new level of professional talent that, after a few years of engaging in this rigorous internal audit regimen, will be more than prepared for key management positions.
And most importantly, the board and C-Suite will be able to maintain a higher level of confidence with auditors, who are on the front lines as the eyes and ears of the board.
The board will be able to discharge its responsibilities without being subject to ambiguity or surprise and present quality products and services resulting in sustainable returns to shareholders.
Walter Smiechewicz is Audit Integrity’s chief consultant in its Los Angeles headquarters.
Nice summary of points Walter. With respects to #1 regarding the strengthening of governance surrounding an entity’s strategic plan, I agree that this is the most critical; however this is often easier said than done and requires full Board and Management support for the Internal Auditor to effectively carry-out this type of audit work and summary reporting. We all have the obligation to ensure the entity carries out its mission, the Board, the Management, and the Internal Auditors. Together, we serve as the “check and balance” system that deters and prevents self-serving interest from superseding that of the Entity in which we serve. The Board and Management must be receptive and willing to engage in the open, candid, and constructive dialogues with the Internal Auditor regarding their views on the effectiveness of the existing governance structures and processes. We must prepare for these candid dialogues by accepting the fact that we must discuss the two topics we are often discouraged to bring to the table – organizational “religion” and “politics.” In the end, these types of periodic candid and constructive dialogues are what will make the difference between those Entities that thrive, die, or barely stay alive.