In the well-known children’s story, an Emperor falls victim to the charms and manipulations of some troublemakers who convince him that his magnificent (and expensive) garments are visible only to those with great wisdom.
Fearful of being seen as unwise, the Emperor – along with most of his subjects – refuses to acknowledge his nakedness, despite the obvious chill he must have been feeling. The hero of the story is a small child who fearlessly states the obvious: the Emperor has no clothes. It is a powerful lesson in courage and provides a useful analogy on the value of speaking truth to power in the context of public administration.
No one likes hearing bad news and, frankly, most people dislike giving it. But, like bad-tasting medicine, speaking truth to power is often needed to protect and strengthen the organization.
In today’s complex world of public administration, having a resource at your disposal that you can trust to give you “the straight goods” is an asset. For departmental Audit Committees and the deputy ministers they advise, this asset is found in internal audit.
The role of audit committees is both varied and critical. Federally, they provide the deputy head with advice on the management control framework, risk management, values and ethics, and financial reporting, among other topics. In some provincial jurisdictions, they also play a more traditional oversight role. In all cases, they, together with the deputy minister, are essential elements of the departmental or agency oversight regime.
To effectively discharge this mandate, they must have access to reliable, balanced and relevant information and insight. Much of this information comes from management directly, through self-reporting and dialogue at the audit committee table.
Perspectives on the state of the organization naturally vary depending on the provider of the information, introducing uncertainty into the job of oversight. As well, public organizations are increasingly operating in a “fishbowl” due to increased public and media scrutiny. But kidding ourselves on the true state of things adds no value. As we know from the Emperor, it leads to embarrassment. Translated to the modern context, this means reputational damage. As well, it can also mean unmitigated risk, loss of financial or other assets, negative impacts on human health and safety, and missed opportunities.
The independence of the internal audit functional and its direct relationship with the departmental audit committee provides a powerful asset to complement the information and insight provided by management. As an objective assurance and consulting function with broad access to information and personnel, internal audit can provide insight into all aspects of the organization. Its position, coupled with its robust analytical methods, translates into trust and reliability.
But speaking truth to power brings with it important responsibilities. Internal audit must be both courageous and constructive. What follows is some advice for audit committees and chief internal auditors:
• Engage and enable, don’t police. Historically, internal audit has been seen as a “policing” function. We know now that the “gotcha” style of auditing brings limited value and, indeed, can be damaging, working against open, collaborative discussions on risk and control.
• Maintain independence and relevance. While it may seem contradictory, active engagement does not fly in the face of auditor independence. Indeed, great value comes from hitting the right balance between the two, resulting in the optimal mix of relevance and reliability.
• Ask the right questions. The great power of the audit committee lies in its ability to ask questions of management and of internal audit. As we know from the Emperor, the most powerful outcomes sometimes come from the most obvious questions.
In today’s context of increasing complexity and risk, effective public administration depends on many things – chief among them are the competencies and qualities of individual leaders. Courage is among the most critical of these qualities. Internal audit, working closely with the audit committee, can be a powerful, constructive force for the organization, speaking truth to power and equipping the deputy head with valuable insight.
IIA Canada is an advocate for Canada’s internal audit profession, representing over 7600 Internal Auditors in Canada. As one of 109 affiliates of the Global Institute of Internal Auditors, IIA Canada advances international standards, applying them in support of uniquely Canadian issues.
