Businesspersons: Better leaders of internal audit than professional accountants

THE transformation of internal audit from a ‘policeman’ to a value-adding business partner has not been as rapid as that demonstrated by the finance and accounting function in the past three decades.

- Ronnie Peiris

While the finance and accounting function, driven by technology, data availability and data analytics, has transformed itself from a predominantly staid, boring, rules based and command/control centric transactional role to a strategic, analytical and emotionally intelligent business partnering role, the internal audit function has procrastinated in responding to the changes demanded by contemporary organisations. This, in my view, is largely due to the internal audit function in most organisations, globally, and particularly in Sri Lanka being ‘helmed’ by professional accountants rather than by businesspersons.

The fundamental difference between the two lies in their core orientation. Accountants are primarily trained in the meticulous recording, analysis, and reporting of financial data. Their expertise lies in ensuring accuracy, adherence to accounting standards, and compliance with financial regulations.

While these skills are crucial for certain aspects of internal audit, they often lead to an obsessive focus on historical data and the detection of past errors or fraud. Most accountants, as a part of their nature and nurtured nature, exude an air of mistrust. They are trained to be ‘suspicious,’ and they are, usually, slow to change in concert with evolving needs.

In contrast, most businesspersons possess a holistic understanding of the organisation’s strategy, operations, market dynamics, and competitive landscape and are open to change. Their thinking is inherently forward-looking, focused on identifying opportunities, mitigating risks that could impede strategic objectives, and driving continuous improvement across the value chain. In Sri Lanka, most organisations seek professional accountants as Chief Internal Auditor (CIA—sounds right!) or Head of Internal Audit or Chief Audit Executive (CAE) as the position is popularly referred to now.

Policing function