11/23/2017 Four Big Challenges Facing Internal Audit

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Four Big Challenges Facing Internal Audit

 @McCa ertyMISTI
By Joseph McCa erty(https://twitter.com/@McCa ertyMISTI) | October 04, 2016

FedEx Chief Audit Executive Robert King on what internal audit departments
need to do to rise to the occasion
There are several big challenges facing internal audit departments and still more
facing the internal audit profession as a whole. Some of them represent
opportunities as well as obstacles to overcome. The di culty in lling internal
audit positions with talented candidates, for example, has led to increases in pay
for many internal auditors. The need to do a better job leveraging technology has
the potential to free internal audit up to do more valuable and higher-level jobs,
raising internal audit's pro le in the organization.
"It's a great time to be in the internal audit profession," said Robert King, chief
audit executive of FedEx, during a keynote speech at the  SuperStrategies 2016
conference (http://superstrategies.misti.com/)  held last week in Las Vegas.
"Executive teams are continually reaching out to us to do more, so it's a great time
that we are being asked to be in the game."
While King asserts that internal audit is increasingly playing a bigger role at most
companies, there are still many hurdles to overcome, he said. One of the major
ones is meeting loftier expectations. "We have to make sure our value proposition
is delivering on those expectations," said King.
During the talk, he outlined four major challenges internal audit departments
must meet if they are to rise to the occasion and deliver on the increased value
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11/23/2017 Four Big Challenges Facing Internal Audit

that boards and management teams

are expecting: managing talent,
becoming a trusted advisor, meeting
increased stakeholder expectations,
and conquering technology demands
and threats.

1. Developing a Workforce Strategy

The di culties around sta ng the

internal audit department
(http://www.misti.com/audit-news-trends/internal-audit-executives-fret-0ver-
talent-gap) are well known these days: not enough quali ed candidates with the
unique set of skills required to be successful in the modern internal audit
department. Salaries are also rising making it more expensive to nd the right
people. King says the critical skills and attributes needed in the internal audit
department include analytical abilities, business knowledge, ability to
communicate well, integrity, courage, con ict management skills, and many
others. "You can't be an auditor if you can't handle con ict," he said.

Since it's di cult to nd all of these attributes, not to mention IT skills, in one
person, King says his department takes a workforce strategy approach, ensuring
that the needed skills are represented across the sta . To get there, his team
conducts a skills assessment and then a gap analysis to pinpoint what skills are
lacking and works to plug those holes, either by providing training and
development or through recruiting e orts. "Aligning with the HR group was a key
part of our workforce strategy," he said.

2. Becoming a Trusted Advisor

Among the most di cult of the challenges King outlined, he said, was building
trust, especially since it can take a long time to build, but can be damaged in the
blink of an eye. "We must build trust and credibility," he said. "There are a lot of
steps along the way, but that trust has to be earned." According to King, a few of
steps along the way to earning trust include being transparent, fair, candid, and
personable. He also advised those in the audience do more listening than talking.
"You have to be out walking around, asking questions, and then listening."

For King, becoming a trusted advisor includes being able to o er business units
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11/23/2017 Four Big Challenges Facing Internal Audit

more insight and foresight than hindsight. "We have to take a more strategic-
driven approach and focus on key initiatives," he said.

3. Delivering Added Value

Along with the mandate to become more of a trusted advisor, there are other
increased stakeholder expectations that internal audit must meet, said King. At the
top of the list is providing more insight on risk and helping the company to be able
to adapt to handle the forever changing nature of risk. "What is your brand? What
is your value proposition?" asked King. "Is the board coming to you and asking
about risk?"

Among the risks that internal audit needs to be better equipped to provide
assurance over, King listed regulatory compliance, third-party relationships,
cybersecurity, emerging markets, and IT governance. To meet the challenge of
providing more insight on such risks, King stresses the need to understand the
business, forge strong relationships with business partners, and drive change. "At
the end of the day, we have to provide the insight to get them to that change,"
said King.

4. Leveraging Technology

The nal challenge that King explored was the need to do a better job at
leveraging technology in internal audit (http://www.misti.com/audit-news-
trends/how-technology-is-changing-the-internal-audit-function) including using
data analytics. He tied technology back into the rst challenge of nding the right
people with the right skills. Indeed, many internal audit departments admit they
are struggling to nd good IT auditors. King joked that there are really only 10 IT
audit leaders that just keep getting hired away from their companies at a higher
salary. One of King's solutions is to hire people with technology backgrounds and
then teach them how to be auditors. "Half of our IT audit sta has no prior audit
experience," said King. "It's easier to teach that than to develop IT skills."

King says data analytics is becoming an increasingly important tool for internal
audit to leverage. After some early stumbles, according to King, the internal audit
team at FedEx is using data analytics more e ectively. He says the key was to
focus more on the data. He enlisted the help of some data scientists and put the
focus on the data, rather than the tools. "Now we are taking that data and getting
to see things we haven't seen in it before."
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King ended his talk with some good advice for all internal auditors on conquering
these challenges. "There are three things we need to do to be successful: you have
to drive change, you have to have passion, and you have to stay relevant.

Joseph McCa erty

Joseph is the former executive editor of Compliance Week, where he was responsible for all editorial
functions.

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