Confessions of an Undercover Auditor

McLeod Governance recently stumbled across a fascinating series of articles in the US automotive magazine Edmunds.

It was titled Confessions of a Car Salesman and the link to the nine parts of the story can be found at http://www.edmunds.com/car-buying/confessions-of-a-car-salesman.html

What does the car salesman do when he leaves you sitting in a sales office and goes to talk to his boss?

What are the tricks salespeople use to increase their profit and how could consumer protect themselves from overpaying?

The journalist spent time in two dealerships in the Los Angeles area – firstly a high volume, high pressure dealership selling Japanese cars.  Then he changed to a smaller car lot that sold domestic cars at a “no haggle” price.

Even if you read nothing more of this McLeod Governance post (and we sure hope you do read more!), we would strongly encourage you to click on the link above (yes we know that we are sending you away from our site to someone else’s intellectual property but we know that you will remember us and think fondly of us!).

The series of articles got McLeod Governance thinking.

Would the internal control environment of an organisation benefit more from auditors operating undercover in a similar capacity?

Now – before you get on your stirrups and mount the proverbial high horse – we are not sitting here in our tower of green ivory advocating that Internal Audit should become or revert to being a covert policeman role.

What we are actually holding out as a suggestion is that Internal Audit forgets about the mantra of “Internal Audit as a Business Partner” that is in everyone’s mandate and actually consider whether it would be more efficient and effective for the internal audit skill set to be anonymously embedded into high risks functions under the guise of another role description.

How exactly would that work and has McLeod Governance finally lost its mind?

Lets deal with the first question first. The second question is for you, dear kind reader, to determine.

In our mind, the Internal Auditor as a Policeman openly seeks to enforce policies, procedures and guidelines that others have devised.

Just as with real life cops – the Internal Auditor as a Policeman can know no subjectivity.

A rule is a rule. And ultimately that is this approach’s downfall. It has no flexibility.

(That – and the fact that just as with real cops – people tend to be scared or at least act differently around such figures of conferred authority).

Conversely, the Internal Auditor as a Business Partner (aahhh … 1994 … the first time that a consultant dreamt up this phrase … happy 20th Anniversary!) seeks to work with the business to encourage compliance based on a call to the best angels of Management’s intentions.

The problem with the Internal Auditor as a Business Partner is that the person and the role can be captured by a devious Management seeking to avoid greater scrutiny of a function or a process.

The key tenement of Internal Audit – independence of judgment – is tainted by definition if you are partnering when that partnering takes the form of the creation and sustainment of joint goals.

Hence McLeod Governance is putting forward another alternative today in this never ending democracy of ideas.

We are not actually sure how we would engineer it (ie – how do you get someone into a role and then tell them that they actually have two hats one of which can never be seen) … but if we could … we think that there would be enormous benefits in Internal Auditors being embedded into business units.

It would be their role to see what is happening when the intense, pre-scheduled light of independent assurance is not present.

It would be their role to document precisely the processes by which decisions are made and resources allocated. (Everyone knows that a process as defined to Internal Audit by Management is rarely exactly how the process works in real time).

It would be their role to seek to improve processes where the processes needed improving.

It would be their role to promulgate best practices where such endeavours are noted.

**

A left of centre thought?

Yes.

One that has so many logical, philosophical and legal challenges that it doesn’t bode well already?

Perhaps.

However, just when you think that it is not worth pursuing.

Ask yourself one question.

Once you read the Edmunds article – will the experience of buying a car ever be the same again?

And if the answer is yes – then you have your answer.

The only reason that you now know what you know about buying and selling cars is that someone did what we are now suggesting.

An anonymous embed.

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