How much waste in project spending is going on in your organization? The fact is, corporations throughout the world are losing billions in wasted project spending and this waste is usually hidden from management and investors. The Internal Auditor as project auditor has a great opportunity to reverse these losses and add value to their organization’s bottom-line. This is a new role for the Internal Auditor. Many auditors may not know or understand the process of managing a project. However, they have great analytical skills that they may use to audit projects. They just need to learn the process of project management and the project tools and project templates for managing projects.

Auditors don’t need to be technical experts regarding the projects they’re auditing. Rather, they need to understand the project management process, project tools and project templates used in the successful management of projects. It is common that an internal auditor will work with an external auditor who specializes in the auditing of projects. This becomes a coaching relationship whereby the external consultant coaches the internal auditor as a project auditor on how to successfully audit projects by undertaking an actual project audit.

One key strategy to gain management’s buy-in to new auditor responsibilities (i.e.; auditing of projects) is to make sure that the Internal Auditor is aware of and understands the issues currently facing the organization as well as foreseeing future potential issues in control, risk and governance in advance. In this way, Internal Audit can add further value to the organization. Once management views the role as important as strategic management; the auditor can more easily gain the support required to provide controls on critical projects and provide recommendations and actions required to reduce unacceptable risk exposures on projects.

Therefore, in order to gain credibility in the eyes of management, Internal Auditors must focus on those things that really matter to the organization. And that usually means auditing the critical projects that are underway. Auditors must have the courage to convey tough messages if appropriate and be prepared to work with management to improve the management of these projects.

Internal auditors often ask me, “How do we get management to appreciate our role?”
Organizations look to individuals and departments that can help them improve their bottom-line, shareholder value and customer experience. They don’t often perceive the Internal Auditor’s role as having the capability of doing this.
The Institute of Internal Auditors (“IIA”) describes auditing as:
“An independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.”

Yet many internal auditors spend most of their time analyzing their organization’s financials, internal controls, compliance processes, etc. In addition to these important activities they must also start examining activities and processes within their organizations that have a direct bottom-line impact as well as adding to shareholder value and customer satisfaction. Auditing projects is one way to do this.

The Amsterdam School of Business published a research study on the Role of the Internal Auditor in July, 2008. They found that there is a shift from the more traditional audit roles of providing assurance to a more proactive audit role in projects.

Common feedback from the (Chief) Audit Executives of the four Dutch multinationals is that the real added value of the internal auditor is to provide assurance and advice during projects (often referred to as a Project Health Check) and that the role should not be limited to a project review after the project (post Project Audit) has finished. One of the reasons mentioned is that auditors, in a Project Health Check, are still able to challenge and give feedback that can be used to mitigate risks. In the post Project Audit, they can have an added value in generating lessons learned that can be used for future projects.

Conclusion

Ultimately, there is an opportunity for the role of the Internal Auditor to shift from Assurance to Projects and organizations that recognize this prospect can benefit greatly.

Michael Stanleigh

Michael Stanleigh, CMC, CSP, CSM is the CEO of Business Improvement Architects. He works with leaders and their teams around the world to improve organizational performance by helping them to define their strategic direction, increase leadership performance, create cultures that drive innovation and improve project and quality management. Michael’s experience spans public and private sector organizations in over 20 different countries. He also delivers presentations to businesses and conferences throughout the world. In addition to his consulting practice and global speaking he has been featured and published in over 500 different magazines and industry publications. For more information about this article you may contact Michael Stanleigh at mstanleigh@bia.ca