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5 Key Traits of Successful Internal Audit Leaders

Mar 22nd 2016
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It’s hard to underestimate the importance of internal audit these days, and a new PwC report helps drive home that point.

The report, 2016 State of the Internal Audit Profession, explores the five attributes of solid leadership by chief audit executives (CAEs) and makes clear the role that stakeholders play, as well.

“The attributes of an effective leader are interdependent,” Richard Chambers, president and CEO of the Institute of Internal Auditors, said in a prepared statement. “One can’t be a talent manager without vision – or build strong business partnerships without executive presence.”

Leadership requires strength in each attribute, but leaders must also recognize their own limitations and, if necessary, get the “additional capacity and capabilities from experienced third-party providers where required,” Chambers said.

The study notes that five characteristics – vision, talent, positioning, communication, and business alignment – are much more common in internal audit leaders considered “very effective” than in those who are, um, less so.

PwC offers this description of how it all intertwines:

“A clear vision drives a business-aligned strategic plan that serves as the roadmap for meeting an organization’s ever-changing needs. A sophisticated approach to talent sourcing and talent development gives internal audit leaders the flexible talent model needed for accessing subject matter expertise, for generating deep business insights that include an understanding of the ultimate root causes of issues, and, ultimately, for seeding the business with highly capable, controls-minded talent. A steadfast vision paired with effective communication builds influence and executive positioning, which, in turn, help internal audit remain business-aligned and engage stakeholders in value-adding relationships. Business partnership and effective communication help the organization recognize and understand current and emerging risks and proactively address thematic issues.”

And as a result, 96 percent of very effective leaders then motivate trust and confidence from stakeholders, who will know that risks are under control, the report states.

Here are the key takeaways about what CAEs can do to build the five leadership characteristics.

1. Vision. A vision for internal audit must be developed and shared, in line with the organization’s business goals and how to achieve them. That includes having the necessary resources and technology. More than half (52 percent) of very effective CAEs have strategic plans in place, compared with 39 percent of effective leaders and 26 percent of less effective leaders.

2. Talent. Have a talent “model” that corresponds to the organization’s risks. Develop that by mentoring future leaders and bringing in outside resources when necessary. Communications about what is expected of internal audit professionals is crucial, including their value to the internal audit function and stakeholders.

3.Position. Take enough action to build stature that, in turn, allows other executives to award more power. A large percentage (78 percent) of very effective leaders are vice presidents or hold other senior leadership positions in their organizations.

4.Communication. Are communications getting the attention of stakeholders and influencing them? More than 90 percent of very effective internal audit leaders communicate exceptionally well, compared to 65 percent of effective leaders and 31 percent of less effective leaders.

5.Business alignment. By building trust throughout the organization, the CAE also increases engagement. In fact, 90 percent of very effective leaders have internal audit functions that perform well at engaging and managing relationships with stakeholders.

Stakeholders, too, have their work cut out for them. The report indicates that for internal audit to be enabled, an organization’s stakeholders have to hold CAEs accountable for ensuring that the function is in sync with the business strategy, making sure that internal audit knows its value and what’s expected, evaluating if the internal audit leader is sufficiently empowered, and offer feedback.

Ultimately, if stakeholders find internal audit leaders to be very effective in the five traits above, then internal audit provides significant value to its organization 92 percent of the time, the report states. But if the leaders are only considered effective, internal audit is rated as having significant value 52 percent of the time.


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