The IA challenges in Singapore

One of our members wryly reminisced at a recent event that when she started out her career in Internal Audit in the late 1980s, all she needed were traditional financial and operational assurance skills. Internal audit used to be an assurance function which evaluated the effectiveness of controls.

Internal Auditors generally performed appraisals. There were less business volatility and regulatory requirements were much simpler. Internal auditors’ skillsets were confined to hard skills that includes technical competency in the assurance process.

Two decades later, her skill sets have expanded. She is now required to be more involved and updated on business operations and the landscape companies operate in. Strong business acumen, relationship management, and change management are all pre-requisite of an internal auditor today.

Internal auditors have a unique position in a company. They report to the Audit Committee functionally and to the CEO administratively. With this independent reporting structure, internal auditors have to understand the organisation’s business and assist the board and management to meet theorganisational goals.

They work with the board, management, and process owners as well as other stakeholders in the value chain to come up with auditable activities using a risk-based approach. As many in the profession know, the role of an internal auditor has changed significantly over the years in response to the changing business landscape.

Today’s business world is very different and so is internal auditing. Internal auditing helps to evaluate and improve the effectiveness of governance, risk management and controls processes in an organisation.

Besides this assurance of conformance, Internal Auditors are also expected to contribute towards improving the organisation’s operations as well as provide consulting and facilitating services for stakeholders.

Internal auditors also have to accept differing expectations from stakeholders. At a roundtable we organised in May 2014, participants highlighted that the board and management have different expectations of internal auditing.

The board and audit committee need internal auditors to provide assurance on a satisfactory governance structure and good internal controls in the organisation. On the other hand, management's priority is to ensure business sustainability and growth. Efficient operations and an optimum cost structure will always be a priority.

In conducting their roles, internal auditors must consider the management’s perspective and provide a balanced solution that supports business and operational development while still ensuring good governance and controls in the processes are in place.

Internal auditors in Singapore also have to deal with challenges unique to Singapore’s role as a business hub for the Asia-Pacific region. Many companies in Singapore have a presence in other parts of the world and particularly in Asia. Internal auditors have to take diverse work practices and regulatory requirements into account to audit such globalised organisations effectively.

What can internal auditors in Singapore do to surmount these challenges? My view is that they need to be even more dynamic in keeping up with regulatory changes, economic headwinds, new technology, and complexity of today’s businesses.

Being technically competent in governance, risk management and controls as well as sound knowledge of regulatory standards across borders are given attributes. Added to that, auditors today must be well equipped to provide hindsight, insight, and foresight to put in place solutions that will impact the business in both the short and long term.

Soft skills, such as effective communications, will become increasingly important, as auditors straddle the expectations on both sides of the fence between management and the Board. 

Today, stakeholders’ increasingly complex demands, rapid regulatory changes, and the demand for strong governance, risk management and controls have put the internal audit function in the spotlight. It is time auditors look beyond controls and assurance functions and live up to their role as a trusted advisor, consultant, and educator to businesses.

At present, auditors already have at their disposal the means to keep up with today’s complex business demands. The first step is to recognise the evolution of their roles and take stock of the steps they need to make in order to remain relevant.