Kundinger The Internal Audit as Change Agent

The activation and successful implementation of organizational change
2. Auflage 2020
ISBN: 978-3-7526-5122-5
Verlag: BoD - Books on Demand
Format: EPUB
Kopierschutz: 6 - ePub Watermark

E-Book, Englisch, 256 Seiten

The goal of the classical approach presented in this book is to deliver a comprehensive overview about objectives, potential activities as well as individual requirements of an Internal Audit acting as Change Agent. Innovation and Change are widely recognized key success factors for sustainable economic growth and entrepreneurial success. Since therefore as well Innovation and Change must be within the focus of corporate business processes and activities, any organizational function should deliver a contribution to a companies' prosperity. Consequently as well Internal Audit, usually equipped with an excellent overview about a companies` activities, processes, structures and key players, should keep an eye on corporate innovation and change. This book is dedicated to all those auditors, managers and other corporate agents who are requested to contribute to organizational change. It is providing methods of resolution to generate or maintain an innovation-friendly organization based on suitable characteristics and successful change processes.

Dr. Peter Kundinger gained global leadership expertise in Internal Audit and Risk Management positions. He worked in several industrial sectors and branches and is an expert in Organizational Design & Development as well as in Change and Project Management. In 2010 he founded PK Improvements© as an independent company mainly dedicated to Interim Management and Consulting services in Internal Controls, Internal Audit and Enterprise Risk Management. Besides that broad practical expertise, he published from time to time articles in magazines and is particularly known as author of the book 'Die Interne Revision als Change Agent`, which was published 2007 in Germany. The underlying approach was presented at several events, amongst others at an IIA Austria convention held in Kitzbühel. He holds a Doctors' degree in Economics from the University of Nuremberg. Furthermore he owns as well a certification as Business Coach from the German Chamber of Commerce.

Autoren/Hrsg.

Kundinger, Peter

Leseproben

1.1 Goals and Attributes of an Internal Audit function
Geared to the classical first part of the definition of the IIA3, Internal Auditing “is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.” 4 Since the approach of Internal Audit (IA) acting as Change Agent (CA) shall be carried out on the fundament of abovementioned comprehension5, the following aspects of an IA function are initially pointed out: Taken into consideration that the overall goals of an IA function are to add value and to improve an organization‘s operation, the question to be clarified first is how these goals can be cascaded down into more detailed orientations respectively objectives? (see 1.1.1.) An IA function can accomplish these objectives by assurance (here as well referred to as „reviewing“) and consulting activities. (see 1.1.2.) To conduct aforementioned activities in a goal-oriented manner, certain individual and professional competencies of an Internal Auditor must be available within an IA function. To comply with abovementioned IIA definition, these competencies must ensure that, „independence“ and „objectivity“ of Internal Auditors, amongst other requirements, are not violated. (see 1.1.3.) Objectives, activities and competencies like explained above shall be understood in the following as the three dimensions of Internal Auditing, shown comprehensively in Figure 1 below. The approach of an IA as Change Agent subsequently will be implemented based upon this model! 1.1.1. Internal Audit Objectives
The principal challenge of everyone who is taking part in IA activities respectively services is how this function (like any other business function as well, by the way) can contribute to each organization’s goal (according to the abovementioned comprehension of Internal Auditing) to generate added value and furthermore to improve its operations reflected in systems, structures and processes. Since there is basically a variety of definitions, views and as well categorizations with regard to what “added value” can mean, a specified nomenclature for the way in which the term of “adding value” shall be applied in this context here is required up-front! As an initial starting point for the following development of a terminology, which is appropriate for this approach here, the current IIA definition of “add value” is serving: after this, an IA activity “adds value to the organization (and its stakeholders) when it provides objective and relevant assurance, and contributes to the effectiveness and efficiency of governance, risk management, and control processes.”6 Since, however, an IA function in daily business might be confronted with a wider variety of possible entrepreneurial or operational requirements, it is worth to shed light on that topic from further perspectives as well: First of all, value added in a pure economic sense is the difference between the price of a product or service and the cost of producing it. It describes the enhancement a company gives its products or services before offering them to customers.7 Following this definition would mean that any business function should support an organization in optimizing its material output compared to the invested input in terms of money and goods. In a macroeconomic sense, this relation might be expressed by the transformation of produced or purchased goods into a higher income, which means a gain in prosperity. From a functional point of view, this means that as well IA as an entrepreneurial function which is not directly involved in the generation or selling of goods or services, must nevertheless contribute to the provision of fundaments for economic added value. Secondly, an added value can be focused on from a different perspective, namely from an ethical or ideational point of view. This approach refers – in a wider sense – back to ancient Greek philosophers like Socrates or Platon and is playing as well an important role in the following, especially when aspects like (corporate) culture or behavior will be introduced as components of an innovation-friendly company later in chapter 2.1.2… Thirdly, there are (two) alternative directions of impact to achieve added value, a direct (quantitative) and an indirect (qualitative) one: Taking added value as a result of an audit activity, it must be reflected in its output, which usually means in an audit report. Presumed that a report should lead to adding-value improvements within a corporation, certain recommendations must be carried out and addressed to the respective auditees. Improvements suggested within recommendations, however, mostly are not directly measurable e.g. in cost savings or cash inflows. Instead of this, the implementation of recommendations often is leading indirectly or not immediately to (not always exactly measurable) economic effects. However, if not in a quantitative way, a recommendation must (at least) gear towards a qualitative resp. indirect improvement of organizational processes, systems or structures. Added value created in this way can be achieved indirectly e.g. by reducing risks, guarantee compliance with regulations or operational improvements. Referring back to the question how added value should be understood in this approach, the conclusion is, that added value can be achieved not only in a quantitative, but as well in a qualitative way. In anticipation of the following, particularly the latter category will be of importance for an IA as CA! Conclusion for an IA as Change Agent: definition of added value Added value here shall be understood as material and intangible values provided by products and services developed by IA (here in terms of an IA Innovation Function, introduced in chapter 2.2) and generated by IA resources which deliver such products and services (here via Change Agent competencies, introduced in chapter 2.3). But how an organization respectively its processes can be improved by Internal Audit? Generally spoken, any improvement for an organization or its inherent business processes can create corporate added value. Taken into consideration, that to „improve an organization’s operations” is nothing else but the second IA goal stipulated in the aforementioned IIA definition, the coherence is evident! To shed light on that topic, basically a closer look shall be taken on the following objectives of IA activities, which are as follows8: Compliance with external (legal) regulations as well as with internal (organizational) guidelines Security, to be achieved by ensuring that an operation’s processes and guidelines are appropriate to prevent a loss of assets Risk Protection, to be achieved by a corporate Risk Management geared to a minimization of identified (significant) risks inherent in a company’s goals, strategies, processes, systems and structures Effectivity in terms of appropriateness of processes or systems with regard to an organization’s overall goals and objectives Economic Efficiency, 9 to be achieved by focusing on appropriate cost-/benefit ratios of a company’s operational measures Social Efficiency, expressed e.g. in an employee’s satisfaction or motivation.10 Since social characteristics might facilitate organizational change, this audit object is of particular interest for an IA as CA. The improvement of any of that objectives leads to an improvement of an organization’s operations and therefore to added value - presumed that with the improvement of one object none of the others is affected negatively! Fig. 2 above summarizes IA goals and their segregation into aforementioned objectives. It must be mentioned, however, that the achievement of any of aforementioned objectives is influenced by the environment in which an IA function operates. An adding-value environment can be characterized by11 top-management (hierarchical) and professional support for the IA function; a co-operative IA network within as well as without the company; a basic IA attitude, which is not only oriented on risks, but as well on opportunities respectively chances; a process-oriented IA approach, which considers risks, chances and their interdependencies;12 an approach which is likely to satisfy IA addressees‘ (customers‘) needs; In-house IA marketing which facilitates the successful contribution of an IA function. When developing the CA role for Internal Auditing and focusing intensively on value adding and organizational improvement, it is quite obvious that those orientations will be generated via change (and innovation). Therefore, a...