Mr Humphrey Okorie , The CEO at Institute of Internal Auditors , Nigeria shares with The CFO, challenges, relationship between internal audit and corporate performance and many more. Excerpts…
What are challenges of internal auditing in organizations in Nigeria?
Internal auditing in Nigeria face many challenges, however I will talk about some. For instance, weak control environment is a major challenge to internal auditing. When you look at the COSO internal control framework, the control environment is the foundation. Using the analogy of a building, when the foundation is faulty, it becomes difficult to achieve sustainable and stable house that would enable you have peace of mind, irrespective of the aesthetics, painting, and decoration of the building. In this case, control environment could be viewed from two angles:
Internal control environment- this is the control environment inside the organisation. These include organizational culture, tone at the top, organizational ethics, managerial courage etc.
External control environment-the state of control external to the business and covers controls around the locality upon which the organisation operates. These include Nigeria as a nation, states, local government areas, other institutions, and stakeholders that the organisation do business with.
Inadequate Internal audit independence and management support. Some organizational allow internal audit to exist just to ‘fulfil all righteousness’ and do not provide the necessary support or ensure their independence.
Internal audit independence is achieved through two ways, the reporting line of the internal audit function and the existence of the internal audit charter duly approved by the appropriate level of authority.
- Inability of internal auditors to provide expected value to their organisations. Another internal auditing challenge lies in the auditors’ inability to provide measurable values to their organisations. Without value, stakeholders will not take the function seriously. Incidentally, there is no better time to offer value than now, when the margins are getting slimmer by the day, disruptive initiatives are challenging status quo, and traditional approach to business operations are fading away.
- Low level of internal audit professionalism. The awareness, understanding and adoption of the international internal auditing standards of the Global institute of internal auditors is still below expectation. When you compare internal auditing practices in many organisations operating in Nigeria, with the requirements of the international professional practices framework (IPPF) for the professional practice of internal auditing you will realise that many organisations are not doing well. Some are not even aware of the basic standards and methodologies for international internal audit practice. Businesses are now global and span across continents and countries, it is essential that for internal auditors to be relevant they must work in line with the global standards.
Could you evaluate the relationship between internal audit and corporate performance?
Internal auditing evaluates the effectiveness of governance, control, and risk management processes within an organisation. How effective the governance, control and risk processes are in an organisation to a large extent determines how well such an organisation will perform. When one examines corporate failures in the past and recent times, one would discover that the root causes of such failures are mainly due to nonexistence or ineffectiveness of governance, control or risk management practices in those organisations.
As the CEO at the Institute Of Internal Auditors, what are you and other members doing to ensure that organizations are well enlightened on what internal auditing is all about?
We undertake various initiatives such as advocacy visits to stakeholders in different organisations, including the government, work with the big 4 and other local consulting firms to organise free breakfast seminars and workshops, organise national conferences through the support of industry stakeholders, provide coaching and mentoring to internal audit practitioners and intending internal auditors, provide learning resources and training to internal audit professionals, collaborate with other similar educational professional bodies in various industries, provide awareness on IIA international professional certifications. We also reach out to professionals and share knowledge through our website and various social media platforms such as LinkedIn and twitters and so on.
What other bodies exist in enforcing right values on internal auditing?
Institute of Internal Auditors (IIA) is the globally recognized body for internal auditing. They develop the international professional standards and code of ethics for the professional practice of internal auditing.
What prompted your interests in this line of career?
Internal auditing is not an aspect of finance. Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Unfortunately and understandably, many people in Nigeria associate internal auditing with finance and accounting. Modern internal auditing does not just cover finance and accounting, rather it goes beyond that to cover every area the business. Internal auditing is a professional career path and individuals from different disciplines are trained to practice as internal auditors.
You are most likely to get the best value from internal auditors who audit or consult in areas of their background or have a good understanding of the business operations. IT professionals who become internal auditors will make better IT auditors, Chartered accountants who become internal auditors will make better finance auditors, those trained in aviation will make better aviation internal auditors, similarly in the oil and gas, automobile and so on.
There are various universities across the globe which offers degrees (B.sc, M.Sc. and PhDs) in internal auditing. People from different backgrounds become trained to work as internal auditors and along the line take various certifications to become certified/qualified internal auditors and can practice globally.
