Strategic Auditing: Prioritizing the Board's Needs for Enhanced Impact

The Core of Strategic Auditing: Serving the Board

The pursuit of strategic internal auditing often lacks a clear definition and actionable steps. Charles Schrock posits that true strategic auditing is fundamentally about addressing a critical question for Board members: "If I, personally, had the time to ensure that I have an accurate view of what's going on in a few key areas, where would I invest my time?" Since Board members lack the time and specialized training to do this themselves, internal audit is uniquely positioned to provide this independent and objective perspective. This reframing shifts the internal audit focus from merely identifying operational anomalies to assessing the effectiveness of governance processes and the accuracy of information flowing to the Board.

Choosing Your Primary Stakeholder Wisely

A common pitfall for internal audit functions is attempting to serve all stakeholders, which often dilutes their impact and strategic value. The article emphasizes the necessity of choosing a primary stakeholder, and strongly advocates for the Board. Different groups have varying information needs; while departmental managers might focus on granular details and fixes, the Board is concerned with overarching governance and the reliability of the picture presented by management. By committing to serve the Board, internal audit gains a clear mandate and the authority to confidently exercise its remit, ensuring that audit findings are translated into insights relevant to high-level oversight.

Practical Steps for Transitioning to a Board-Centric Approach

Transitioning to a Board-centric strategic audit function doesn't necessarily require immediate direct engagement with Board members. Chief Audit Executives (CAEs) can initiate this shift through several actionable steps within their existing discretion:

• Review Metrics Flowing Upward: Ensure that every audit assesses the meaningfulness and accuracy of metrics reported to higher levels. Recommendations should prioritize fixing deficiencies in these metrics, thereby highlighting their impact on the Board's ability to govern.
• Translate Errors into Governance Insights: Frame identified errors or anomalies not just as operational issues, but as indicators of underlying governance or control weaknesses. The Board is less concerned with isolated errors and more with systemic issues that could lead to future, potentially existential, problems.
• Align Audit Scopes with Board Interests: Proactively adjust audit scopes to focus on areas of probable Board interest, such as major strategic initiatives. This demonstrates internal audit's capacity to provide independent, accurate views on critical organizational activities, even before direct Board dialogue is established.

These steps allow internal audit to begin reshaping perceptions and demonstrating its strategic value to the Board, laying the groundwork for a more mature and impactful relationship.