Written By Chris Brown
To deliver results that senior executives value, public sector internal auditors need to build effective relationships, develop a detailed understanding of the organization in which they operate, and focus audit work on areas of greatest risk.
This was the key message from a panel discussion at the recent Government Internal Auditors Council of Canada (GIACC) annual meeting, which took place in Vancouver on July 9-10, 2015. Panel members included three senior British Columbia officials: Cheryl Wenezenki-Yolland, Associate Deputy Minister of Finance; Russ Jones, Deputy Auditor General; and Stuart Newton, Comptroller General.
Relationships come first
The panel members were unanimous on the importance of effective relationships. “Internal auditors need to get out and talk to stakeholders, especially deputy ministers and chief financial officers,” Ms. Wenezenki-Yolland said. “Find out where the risks are. You need to understand them. You need to understand the context.”
“Really engage with the organization,” she added. “Find out how to work with management. Provide advice on the ground, without losing your independence.”
Stuart Newton, who was formerly Executive Director, Internal Audit and Advisory Services in British Columbia, encouraged auditors to use audit findings to build relationships beyond the confines of the normal audit report audience. “Audit results can have implications more broadly,” he said. “If disseminated to a broader audience, they can build understanding of how internal audit can help management, and increase credibility.”
Relations with the Auditor General
One key relationship for internal audit is with the Office of the Auditor General. Despite the differing perspectives of internal and legislative audit, “We’re all here to look after the public interest and to add value,” said Deputy Auditor General Jones.
He said internal audit used to “help” the Office of the Auditor General. With a few exceptions, he said “we no longer need internal audit to do procedures for us.” Now the OAG is interested in the value for money audits conducted by internal audit.
Mr. Jones said the work of British Columbia’s internal audit group in reviewing Crown corporations and government agencies has provided particularly useful information to his office. He noted that the two offices meet annually to ensure they are not duplicating efforts.
In his view, it’s good that Audit Committees are taking internal audit away from mundane work, and focusing on things that really matter. “It provides us some comfort that certain program areas are being looked at,” he said.
Ms. Wenezenki-Yolland said British Columbia’s new Auditor General and Assistant Auditor Generals are interested in how to evaluate new governance models. “There’s a mutual interest there; we’re trying to build on it now.”
Stuart Newton, reflecting on the importance of the OAG-internal audit relationship, said that even if a particular Auditor General is not supportive of a close relationship with internal audit, staff at lower levels can still work together.
Flexibility is essential
The flexibility to adapt to circumstances is necessary in the constantly changing world of government. People change, government priorities change, reporting relationships change, funding levels change — and internal audit has to change too.
One GIACC member, noting the experience of internal audit groups across the country, said over time the function’s resources increase, then get cut, then are brought back again. “How do we break this cycle?” he asked.
“You don’t,” replied Cheryl Wenezenki-Yolland. “You just have to adjust to the environment.”
Ms. Wenezenki-Yolland said internal audit has adjusted successfully, at least in British Columbia, “Internal audit has evolved constantly,” she told the conference. “Auditors need to understand the environment and add value in the context of the risks present.”
In British Columbia, the focus of the centralized internal audit function in recent years has been on value for money audits in Crown corporations and government agencies. This has meant a shift of attention away from the previous focus on financial controls in government ministries.
As a result, according to Ms. Wenezenki-Yolland, “Internal audit is seen as extremely relevant. Their recommendations have changed practices and policies” with regard to Crown agencies. Now, her office, which is responsible for corporate governance in Crown agencies, is encouraging those organizations without an internal audit function to establish their own.
Chris Brown is Assistant Deputy Minister, Internal Audit & Advisory Services, Government of British Columbia. He chaired the July panel discussion. GIACC brings together the heads of internal audit of Canada’s federal, provincial and territorial governments.