The mere mention of the word audit can make both individuals and companies try to ignore reality, just for very different reasons. Like taxpayers fearful of the "a" word and the harsh gaze of the IRS, many corporations are equally dreadful of the internal audit, pretending the phrase was never mentioned and hiding beneath the corporate equivalent of the pile of musky old handmade quilts your grandma has given you over the years.

If you've got the internal audit blues and are looking for ways to improve your IA department, think of your friends here at Embark as the cavalry racing over the hill to save the day. Yes, we think highly of ourselves but, as you will see with our tips on improving your IA department and process, accounting-based altruism is deserving of its just rewards. Or something like that.

1. Reporting Structure

A seamless and effective structure provides any IA department needed levels of communication and transparency. First and foremost, who your CAE (Chief Audit Executive) reports to can play a significant role in the ultimate effectiveness of the department. In order to avoid any objectivity issues or conflicts of interest, it is best practice that your CAE should not report directly to your CFO. Alternatively, a CAE should report to the Audit Committee.

2. Gain the Trust of Key Players in the Organization

Despite the phobias revolving around the "a" word, an IA department doesn't want to be the awkward and feared crazy uncle sitting at the corporate dinner table. IA department members need to establish relationships with key employees throughout the organization to gain their trust rather than simply be the bad guy that only speaks when pointing out mistakes.

In fact, when such relationships are developed and maintained, those employees are far more likely to ask IA department members for assistance, voice concerns about the design or implementation of controls, or even suspect incidents of fraud.

Open, communicative relationships with other employees make them more comfortable in confiding in you without fear of being reprimanded. You’re all playing for the same team and share common goals and objectives for the organization.

3. Quality versus Quantity

In the IA world, the concept of less is more is often forgotten when audit plans are drawn for the fiscal year. Rather than conducting numerous audits simply for the sake of it, take a more strategic approach and develop your plans around the areas that will likely have the most impact on the organization – both operationally and functionally – especially any high risk areas.

Furthermore, IA leaders must be able to successfully balance their focus between specific issues and details and the bigger picture. Audits should also have a targeted scope that is neither too ambitious or open ended. Like any project within an organization, audit should have clearly defined parameters and time durations to prevent efforts from being diluted and results muddied strictly from sheer scope.

4. Partnering With the External Auditors

Working with external auditors fosters collaborative efforts while mitigating the risk of overlap or gaps in the scope of work performed by both parties. Establishing and maintaining healthy, communicative relationships with your external auditors will bolster their confidence in relying on work performed by the IA function and ultimately eliminate costs associated with the external auditors actually performing the work. By being in agreement with external auditors and understanding their approach, you will better enable yourself to gain trust from the Audit Committee as they often value the opinion of the external auditors. Presenting a united front with the external auditors in an Audit Committee meeting ensures your Internal Audit will be up to date, informed and will have no missed issues.

5. Make Sure Executed Audits Ultimately Add Value

Never lose sight of one of the primary goals of an IA – helping management accomplish the objectives of the organization and bringing focus to opportunities that may have been missed or overlooked. An IA department is not there to constantly point fingers and identify things that might be wrong. The overarching mission for an IA department should be to add true value to a company and not primarily geared towards identifying immaterial mistakes.

Conducting risk assessments can ensure audit activities are adequate and properly aligned with objectives, in essence minimizing the risk of not adding value for each engagement. As an example, Embark recently helped a company completely rework their invoice processing rather than just maintaining a myopic, audit-exclusive perspective. In turn, we were able to assist management in making their invoice processing 50% more efficient and, thus, make their lives much easier along the way.

6. Being Ingrained, Committed and Positive

Internal auditors shouldn't be viewed as one of the Four Horsemen determined to generate sleepless nights, sweaty palms, and fever dreams. In other words, there's no reason to hide beneath that pile of musty old quilts when an IA comes walking down the hallway.

To develop healthier relationships within the organization, and IA department should do its best to avoid feeding into the unfair and hackneyed perception that their only goal is to pinpoint errors in anything that might be wrong. Instead, an IA department should be demonstrative in their praise when things are going well and be a constant champion for both the organization and the team.

As some wise folks have previously said, accountants are people, too, even those of the auditing variety. Be open and effusive when goals are accomplished, succinct and constructive when there's room for improvement. In doing so, the entire organization benefits.