Tag Archives: effectiveness

Thank you for the opportunity to speak at the 2019 conference of the IIA Slovenia

31 May

 

 

Dear Polona Pergar Guzaj (President of the IIA Slovenia) & the organizing team, dear participants,

it was so nice meeting you in person in Ljubljana. Everything was perfectly organized. The audience was amazing with about 200 members of the IIA Slovenia and participants from neighboring countries. First class.

Thank you for inviting me as guest speaker at your annual conference 2019. It was a great pleasure contributing to the success of your event. Please find attached my presentation in PDF-format: 20190531-IIA Slovenia-Rainer Lenz. I am keen on learning more about the vote of the audience regarding the perceived significance of each component of W-R-A-P-S, a model to improve decision making (in internal auditing).

Glad we stay connected.

Best wishes

Rainer

 

Ljubljana, May 31, 2019

 

 

 

 

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Internal Audit Effectiveness: Multiple Case Study Research Involving Chief Audit Executives and Senior Management

10 Jan

81249

Lenz, R., Sarens, G. & Hoos, F. (2017), Internal Audit Effectiveness: Multiple Case Study Research Involving Chief Audit Executives and Senior Management, EDPACS, 55:1, 1-17

LENZ, SARENS & HOOS (2017) EDPACS, 55:1, 1-17

Abstract

The focus of this study is the relationship between Chief Audit Executives (CAEs) and Senior Management (SM) and its relationship with internal audit (IA) effectiveness. The study reveals differences between more and less effective IA functions and offers explanations by studying organizational, personal, and interpersonal factors within the German corporate governance context. The findings show that the pattern of interaction between CAEs and SM are a key determinant of IA effectiveness. This study highlights the danger of viewing customer satisfaction as the key measure of IA effectiveness since in practice expectations can vary significantly and as sometimes very little may be demanded. Moreover, CAEs typically adjust to expectations, upward and downward. CAEs can drive the agenda as well. When it comes to personality factors, “Fingerspitzengefühl” and swimming in the organization characterize the successful internal auditor. IA designations for CAEs were not found to be of added value. At organizational level, the findings show that companies that are considered as “hidden champions” demand and benefit from effective IA practices.

Keywords: internal audit, effectiveness, organizational factors, personal factors, interpersonal factors.

 

Additional author information

Rainer Lenz, PhD, CIA, QIAL, CIIA, is a seasoned financial and audit executive with over twenty years of international experience in global organizations.

Gerrit Sarens, PhD, CIA, is full professor in audit and governance at the Louvain School of Management (Belgium). He is the author of several books and articles on internal audit.

Florian Hoos, PhD, is assistant professor in accounting and management control at HEC Paris (France). He has won numerous awards, including the nomination as one of the worldwide 40 best business school professors under 40.

#VolkswagenScandal. Why did nobody stop the malpractice at the People’s Car? Is the German two-tier board system part of the problem?

27 Sep

VW

http://www.spiegel.de/wirtschaft/unternehmen/vw-wusste-in-abgas-affaere-schon-frueh-bescheid-a-1054926.html

According to SPIEGEL ONLINE (September 27, 2015), Volkswagen was alerted by Bosch already in 2007 for what the wrongdoing is concerned. In the recent edition of DER SPIEGEL (September 26) reference is made to the European Union-Law No. 715/2007, which prohibits the use of systems that manipulate the analyses of car emissions; a law to be enforced by no later than 2009. That article is titled German Double Standards (“Deutsche Doppelmoral”) for German politics have not yet been enforcing that law in practice. In 2011, according to SPIEGEL ONLINE (September 27), Volkswagen’s Internal Audit department addressed the matter.

It is unclear at this point, who knew what and when. As a matter of fact, nobody stopped the malpractice. Another four years on, in September 2015, energy emission fraud eventually hit Volkswagen, the People’s Car. Then, all happened rapidly. The CEO was forced to step down. The share price dropped over 40% within two days. The stock value melted from EUR 80 billion to EUR 55 billion within a week. A lot of money lost. Even worse, reputation went downhill. Nobody likes fraud and fraudster.

Volkswagen is about to get back on its feet. Rebuilding trust will be more demanding than smoothening crumpled paper. That is expected to take a decade as a supervisory board member states (DER SPIEGEL, September 26, 2015) – if at all successful. I very much hope so.

I ask myself, why did nobody stop the malpractice at the People’s Car? I wonder whether the German two-tiers board system is part of the problem. The German corporate governance context is characterized by two-tier board structures with a Management Board (Vorstand or Geschäftsführer depending on the type of legal entity) and a separate Supervisory Board (Aufsichtsrat). In Germany, Senior Management is generally regarded as the chief stakeholder of Internal Audit as it is common practice for the Chief Audit Executive to report directly to the Management Board, while the Chief Audit Executive may or may not have direct access to the supervisory body or a sub-committee thereof, such as the Audit Committee. Thus, in the German two-tiers board system the risk is that Internal Audit’s reports to the Supervisory Board/Audit Committee may be filtered by Senior Management in such a way that only what is palatable to Senior Management is communicated (2tier).

I am keen on learning the information flow to the Supervisory Board / Audit Committee @ Volkswagen. What did they know? Who informed them? How was that done? What did the Internal Audit report from 2011 actually say? Etc.

In order to “get the boss right”, strategically positioning the Internal Audit Function closer to the Supervisory Board to help the Internal Audit Function’s performance and effectiveness, may be worthy of consideration.

What do you think?

Internal Auditors as change agents: What a difference a year makes!

9 Sep

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This article provides conceptual and practical insights into features within the more immediate control of the Chief Audit Executives, helping or hindering Internal Audit effectiveness. Self-perception and external perception can differ greatly (Section 2). Positioning and communication are instrumental when identifying successful Internal Audit Functions; these make a fundamental difference as to whether the Internal Audit Function is positioned as police, servant, consultant, doctor or change agent (Section 3). Practical insights then demonstrate what a difference a year makes. Guided by the change agent, the more effective Internal Audit Function can prove also with hard data that there are fewer overdue findings, that reports are delivered more swiftly, and quantum leaps of productivity can be achieved (Section 4).

The Open Auditor – Sept 2015 FINAL

Make the internal audit function effective in practice

15 Aug

IA Looking Good with copyright

I notice increasing readership of my insights into the effectiveness of internal audit (please see https://www.researchgate.net/profile/Rainer_Lenz2/stats). I hope that this venture into the academic world is regarded in parts as “research you can use”. Being critical towards the status quo in internal audit, the results may well be used to improve practice. What do you think?

Is that just a matter of semantics? Do agents of change compel or rather inspire? What do you think?

10 Jul

IIA-2014-Annual-Report

The 2014 annual report of the IIA, titled as AGENTS OF CHANGE, emphasizes the ambition to be effective as internal auditor. It says “To be effective, internal auditors must possess not only sound judgment and critical thinking, they must compel others to an appropriate and sometimes urgent response …”

I agree. And, I have one suggestion, that is, I suggest replacing “compel” by “inspire”. Why?

With pleasure I notice that the effectiveness of internal auditors has made it on the front page, well noting that this claim is aspirational at this point in time for internal audit agency presently is a rare phenomenon in practice. It is not the stereotypical model yet that internal auditors emerge as agents, who challenge the status quo and initiate to alter “the way we do things” in an organization.

However, internal auditors may become change agents. In doing so, the stereotypical model may transform from being rather reactive, responding, and seeking to meet others’ expectations to being an agent who drives change. A change agent breaks with institutionalized practices and contributes to establishing a new pattern. That requires particular personal characteristics and competences in, among others, liaising successfully with auditees, senior management and the board / audit committee, including business acumen, leadership and communication skills, listening and influencing skills and relationship acumen. When seeking to make a difference, and creating a unique and sustainable identity, inspiring others to change may become the avenue of success. Ultimately, the internal auditor has no formal mandate, he / she is in a way a “leader with no title”. When acknowledging that, inspiring others to change may be the more promising path when emerging as AGENTS OF CHANGE.

Internal Audit. Effective? Questions!

9 Dec

http://www.emeraldinsight.com/toc/maj/30/1

Citation

Rainer Lenz, Ulrich Hahn (2015), A synthesis of empirical internal audit effectiveness literature pointing to new research opportunities, Managerial Auditing Journal, Vol. 30 Iss: 1, pp. –

Purpose

Ten years after Bailey, Gramling and Ramamoorti (2003) presented research opportunities in Internal Audit (IA) this paper provides a synopsis of what academic literature says about IA effectiveness. A new set of research questions that may help to bring the best out of IA is proposed.

Design/methodology/approach

Empirical studies based on internal auditors’ self-assessments (“inside-out”) and empirical studies based on other stakeholders’ perspectives (“outside-in”) are reviewed through an “effectiveness lens”. The “outside-in” perspective is regarded as particularly valuable.

Findings

First, we identify common themes in the empirical literature. Second, we synthesize the main threads into a model comprising macro and micro factors that influence IA effectiveness. Third, we derive promising future research paths that may enhance IA’s value proposition.

Practical implications

The “outside-in” perspective indicates a disposition to stakeholders’ disappointment in IA: IA is either running a risk of marginalization (IIA, 2013; PWC, 2013) or has to embrace the challenge to emerge as a recognized and stronger profession. The suggested research agenda identifies empirical research threads that can help IA practitioners to make a difference for their organization, be recognized, respected and trusted, and help the IA profession in its pursuit of creating a unique identity. This paper wishes to motivate researchers to explore innovative research strategies and probing new theories as well as benefitting from cross-fertilization with other research streams.

Originality/value

This paper summarizes the state of research on IA effectiveness and proposes a guide for future IA research. It provides pointed questions that may further advance the understanding of what constitutes IA and how IA can enhance its value proposition.