Sunday, May 08, 2005
Ballads of Symphony- New Age of Internal Audit Definition
Internal Audit- By definition we captures the catch words as
· Efficient utilization of resources (We don’t know how to collect resources)
· Safeguarding the assets of the company (we don’t give a damn shit to liabilities!!)
· Designing and testing the efficiency of internal controls (How? Don’t ask us please!!)
· Keep a tab on fraudulent characters and activities (We may be part of that!!)
· Bark at strangers who looks like idiots (May be he is a typical dhoti wala billionaire, we will chase him out of the campus!!)
People went forward again and modify the catch word to buzz word
· Keep a watch on ethical behavior of management and their sound practices
· To raise a hue and cry for a bigger hound (oversight bodies with independent and bigger dogs!!) and constantly pursue for that coveted post
· Quality assurance
· Benchmarking and Best practices
· Fraud Management as preventive measure and so on……..
The list goes on like never ending tail of famous “drauapadi’s sarees”. One publishing magazine wondered, what’s happening with IIA (The prime body for internal auditors) Accounting fraternities. Why they are changing the definition again and again!! They were clueless and decided to ask nobody else rather the Grand Father (Marvin Bower!!). Well Bower was aging and mostly on pills. He didn’t dig again like his young hay days, rather answer was point blank. I am not sure whether Bower knew something like “Mahabharat” or not. He said coolly like a sick underworld don “they change the definition because in democracy dogs are not allowed to bark”.
With that kind of diplomatic answer, magazine editor wondered for three days. What does that mean now? If a human being can bark in democracy why not a poor doggie? They turned to Mr. Rajat Gupta, as they thought Gupta is the best person to understand Bower what’s the hell is that Drauapadi???
Gupta didn’t go by Mahabharat and stuffs. Rather with two eye brows itching for Meta oblivion he replied if internal audit is drauapadi’s sarees then Accountants are Dushashan and clients are pandavs. (Who are watching helplessly and hoping for some god damn Lord Krishna to come and take them out, they are not interested in Draupadi, rather the sight!!)
Internal Audit devolves day by day to the new scale and heights. Time and time again definition got changed but unfortunately not the people. Targeted cost reductions, hitting employee’s heads and speak something with their bigger hound friends some facts and truce which pandavs never heard of.
Finally one objective statement is declared by IIA once again in 2002!!
· Provides assurance and consultancy services (Expect a different bill too!!)
· Improves and add value to the organizations
· Help the organization to achieve its objectives (Remember we helped Enron too!!)
· Auditing the managerial process, internal control processes and risk management
· Systematic and disciplined approach (May be heads down, with a query asked by somebody we love to raise finger at others like a malnourish umpire signaling a wicket!)
The statement includes consulting services, IT Audit, law governance and so on.
With all these things ready, suddenly there is a spurt of activities. Business Process Outsourcing, Re-engineering services/Supply Chain Management redefined, Change Management etc. Ha ha….. Time to change the again the definition.
Here we go…
Internal Audit includes:
· Macro risk analysis
· Auditing management process (here is a shift from managerial, by the way what’s the difference??)
· Production of future oriented performance
· Contributing to project developments
· Management Consulting (Suddenly management has become a budge word)
· Performance measurement and efficiency analysis
And surprisingly there is a conclusion to the definition as if we are expressing aero dynamics to vegetable vendors!! With the effort goes inside the definition now we should be happy. Looooooooo……… What’s this now? Something called as “Trade way Commission Report” is adopted as the best control model. Another blunt reminder that vegetable vendors are better when it comes to controls!! Shall we bow down in front of the vendors…..no way sir.
Then what to do?? Nothing much call it as COSO. Phew….Made in Japan, marketed by USA.
Is this really called audit? Let’s see what thinkers said all about……
“If you suspect my husbandry of false hood call me before the exactest auditors and let me on the proof”- William Shakespeare
Oxford dictionary defines “Audit” as
· “A hearing: a judicial examination of hearing complaints
· An official examination of accounts with reference to vouchers and evidence.
Audit is old as the hills. It is the sibling of distrust and temptation. The record of Mesopotamian culture reveals there is a tick in front of the financial transaction way back 5500 years back!!
Auditor observed the construction of Great Wall of China; they counted blocks while building pyramids. They criticized the labour costs. Of course we owe the Roman meaning as “hearing” the most common ostensibly used word for auditing.
There is a direct line between audit and confidence. As the later declines because of reported failures, falling standards, organizational change or whatever so the demand for additional service of assurance or protection. Hopefully the auditor will be doing a real job. The word audit has entered the vocabulary in common parlance, representing any reasonable objective and thorough appraisal of objective, representation of state of affairs.
Obviously there is a cost to everything; over-auditing is not welcomed at all. The story of factory manager who welcomed financial auditors on Monday, tolerated internal auditor on Tuesday, On Wednesday fettled and quibbled over findings of quality auditor, Thursday lambasted the trainee and health safety auditor, Friday blew his top at environmental auditors!! This shows the demographic changes the auditors.
“The typical auditor is a man intelligent, cold, and passive, non-committal, with eyes like coldfish, polite in contact but at the same time unresponsive in contact, damanable as a contract post, a human petrifaction with a hard feldspar and without charm, minus bowels/passion or sense of humor. They all go to hell”. This is a sarcastic comment by one of the CEO!!’
Later part of the century something called as internal audit evolved from soil. The guys appear to be jovial, play a second fiddle along with management, tried to listen carefully, remain calm and helping.
“An internal audit may be defined as organized arrangement for securing a continuous and thorough check on transactions. It should be regarded as supplementary to external audit. The presence of internal auditor is to boost the morale of the employees, efficiency and creates a jovial atmosphere.”
The Institute of Internal Auditor in 1999 sharpens it’s sword on external auditors. “Internal Audit is an independent, objective assurance and consulting activity designed to add value to organization’s operations. Unlike the counterparts who loves to hide their face in confusing skirts of compliance laws”.
Mr. Ron Daniel had couple of words for external auditors “An auditor is not to be confined to the mechanics of checking vouchers and making arithmetical computations. He is not to be written off as professional adder-upper-sub tractor.”
Nit-picking connotation
“You will recognize the unhappy inadequacy of the phrase of internal auditor. Years ago it was probably satisfactory services of collecting documentation. Auditing today means some other phrase; we must bow to our predecessor’s mistake.”
You don’t have to be a mad, a sadist and a masochist to be an auditor but it helps. Most auditors regards themselves sitting back happily asking for details, deterrent effort-provoking conduct through fear.
“Assumptions of distrust sustaining audit processes may be self-fulfilling as auditees adapt their behavior strategically in response to the audit process, there by becoming less trust worthy.”
Eric Collin ham describes external auditor function as “I know of cases where the auditing department is looked upon as a spot to faithful employees, who has served their usefulness to constructive accounting. Where as internal auditing department does the ability of highest order management skills comprise of old and new”
Let’s wake up!!!
Auditor’s business analyst…visionary ….diplomat……entrepreneur …an international challenge.
· Efficient utilization of resources (We don’t know how to collect resources)
· Safeguarding the assets of the company (we don’t give a damn shit to liabilities!!)
· Designing and testing the efficiency of internal controls (How? Don’t ask us please!!)
· Keep a tab on fraudulent characters and activities (We may be part of that!!)
· Bark at strangers who looks like idiots (May be he is a typical dhoti wala billionaire, we will chase him out of the campus!!)
People went forward again and modify the catch word to buzz word
· Keep a watch on ethical behavior of management and their sound practices
· To raise a hue and cry for a bigger hound (oversight bodies with independent and bigger dogs!!) and constantly pursue for that coveted post
· Quality assurance
· Benchmarking and Best practices
· Fraud Management as preventive measure and so on……..
The list goes on like never ending tail of famous “drauapadi’s sarees”. One publishing magazine wondered, what’s happening with IIA (The prime body for internal auditors) Accounting fraternities. Why they are changing the definition again and again!! They were clueless and decided to ask nobody else rather the Grand Father (Marvin Bower!!). Well Bower was aging and mostly on pills. He didn’t dig again like his young hay days, rather answer was point blank. I am not sure whether Bower knew something like “Mahabharat” or not. He said coolly like a sick underworld don “they change the definition because in democracy dogs are not allowed to bark”.
With that kind of diplomatic answer, magazine editor wondered for three days. What does that mean now? If a human being can bark in democracy why not a poor doggie? They turned to Mr. Rajat Gupta, as they thought Gupta is the best person to understand Bower what’s the hell is that Drauapadi???
Gupta didn’t go by Mahabharat and stuffs. Rather with two eye brows itching for Meta oblivion he replied if internal audit is drauapadi’s sarees then Accountants are Dushashan and clients are pandavs. (Who are watching helplessly and hoping for some god damn Lord Krishna to come and take them out, they are not interested in Draupadi, rather the sight!!)
Internal Audit devolves day by day to the new scale and heights. Time and time again definition got changed but unfortunately not the people. Targeted cost reductions, hitting employee’s heads and speak something with their bigger hound friends some facts and truce which pandavs never heard of.
Finally one objective statement is declared by IIA once again in 2002!!
· Provides assurance and consultancy services (Expect a different bill too!!)
· Improves and add value to the organizations
· Help the organization to achieve its objectives (Remember we helped Enron too!!)
· Auditing the managerial process, internal control processes and risk management
· Systematic and disciplined approach (May be heads down, with a query asked by somebody we love to raise finger at others like a malnourish umpire signaling a wicket!)
The statement includes consulting services, IT Audit, law governance and so on.
With all these things ready, suddenly there is a spurt of activities. Business Process Outsourcing, Re-engineering services/Supply Chain Management redefined, Change Management etc. Ha ha….. Time to change the again the definition.
Here we go…
Internal Audit includes:
· Macro risk analysis
· Auditing management process (here is a shift from managerial, by the way what’s the difference??)
· Production of future oriented performance
· Contributing to project developments
· Management Consulting (Suddenly management has become a budge word)
· Performance measurement and efficiency analysis
And surprisingly there is a conclusion to the definition as if we are expressing aero dynamics to vegetable vendors!! With the effort goes inside the definition now we should be happy. Looooooooo……… What’s this now? Something called as “Trade way Commission Report” is adopted as the best control model. Another blunt reminder that vegetable vendors are better when it comes to controls!! Shall we bow down in front of the vendors…..no way sir.
Then what to do?? Nothing much call it as COSO. Phew….Made in Japan, marketed by USA.
Is this really called audit? Let’s see what thinkers said all about……
“If you suspect my husbandry of false hood call me before the exactest auditors and let me on the proof”- William Shakespeare
Oxford dictionary defines “Audit” as
· “A hearing: a judicial examination of hearing complaints
· An official examination of accounts with reference to vouchers and evidence.
Audit is old as the hills. It is the sibling of distrust and temptation. The record of Mesopotamian culture reveals there is a tick in front of the financial transaction way back 5500 years back!!
Auditor observed the construction of Great Wall of China; they counted blocks while building pyramids. They criticized the labour costs. Of course we owe the Roman meaning as “hearing” the most common ostensibly used word for auditing.
There is a direct line between audit and confidence. As the later declines because of reported failures, falling standards, organizational change or whatever so the demand for additional service of assurance or protection. Hopefully the auditor will be doing a real job. The word audit has entered the vocabulary in common parlance, representing any reasonable objective and thorough appraisal of objective, representation of state of affairs.
Obviously there is a cost to everything; over-auditing is not welcomed at all. The story of factory manager who welcomed financial auditors on Monday, tolerated internal auditor on Tuesday, On Wednesday fettled and quibbled over findings of quality auditor, Thursday lambasted the trainee and health safety auditor, Friday blew his top at environmental auditors!! This shows the demographic changes the auditors.
“The typical auditor is a man intelligent, cold, and passive, non-committal, with eyes like coldfish, polite in contact but at the same time unresponsive in contact, damanable as a contract post, a human petrifaction with a hard feldspar and without charm, minus bowels/passion or sense of humor. They all go to hell”. This is a sarcastic comment by one of the CEO!!’
Later part of the century something called as internal audit evolved from soil. The guys appear to be jovial, play a second fiddle along with management, tried to listen carefully, remain calm and helping.
“An internal audit may be defined as organized arrangement for securing a continuous and thorough check on transactions. It should be regarded as supplementary to external audit. The presence of internal auditor is to boost the morale of the employees, efficiency and creates a jovial atmosphere.”
The Institute of Internal Auditor in 1999 sharpens it’s sword on external auditors. “Internal Audit is an independent, objective assurance and consulting activity designed to add value to organization’s operations. Unlike the counterparts who loves to hide their face in confusing skirts of compliance laws”.
Mr. Ron Daniel had couple of words for external auditors “An auditor is not to be confined to the mechanics of checking vouchers and making arithmetical computations. He is not to be written off as professional adder-upper-sub tractor.”
Nit-picking connotation
“You will recognize the unhappy inadequacy of the phrase of internal auditor. Years ago it was probably satisfactory services of collecting documentation. Auditing today means some other phrase; we must bow to our predecessor’s mistake.”
You don’t have to be a mad, a sadist and a masochist to be an auditor but it helps. Most auditors regards themselves sitting back happily asking for details, deterrent effort-provoking conduct through fear.
“Assumptions of distrust sustaining audit processes may be self-fulfilling as auditees adapt their behavior strategically in response to the audit process, there by becoming less trust worthy.”
Eric Collin ham describes external auditor function as “I know of cases where the auditing department is looked upon as a spot to faithful employees, who has served their usefulness to constructive accounting. Where as internal auditing department does the ability of highest order management skills comprise of old and new”
Let’s wake up!!!
Auditor’s business analyst…visionary ….diplomat……entrepreneur …an international challenge.
