The Internal Audit Leader of the Future

1. The Internal Audit Leader of the Future IIA Israel Conference, Tel Aviv 2 February 2012

2. Background to the Speaker • Vice President, IA Centre of Excellence, Huawei • Senior Vice Chairman - Global IIA • Immediate Past President of the ECIIA (2010-2011) • Past President of the IIA UK and Ireland (2005-06) • Provided Capacity building in Internal Audit & PIFC since 1998 • Worked in the UK, Estonia, Latvia. Lithuania, Poland, Hungary, Czech Republic, Kenya, South Africa, Romania, Macedonia, Croatia, Serbia, Kosovo and Turkey • Now responsible for developing internal audit capacity in a worldwide Chinese owned telecoms company

3. Some real changes The profession - founded in 1941 With Europe at war -and the rest of the world not far off

4. Some real changes… The profession – developing a new look in the two thousand and tens And with Europe again in crisis

5. Some real changes… From Clipboard To Tablet

6. What is the Future… “If surveyed today on how well internal auditing is meeting its needs and expectations, my audit committee/executive management would probably rate their overall satisfaction…” Source: Emerging Trends and Leading Practices Spring 2011, The Institute of Internal Auditors – Audit Executive Network

7. What is the future Surveys of Directors/Managers tell us: • 74 percent believe internal audit needs improvement • 96 percent believe this needs to be within the next 24 months • Only 44 percent believe internal auditing helps achieve business objectives • Only 37 percent involve internal auditing in key business decisions and strategy • Only 32 percent believe internal audit attracts future leaders and high potential talent from within the business

8. What is the future… The CBOK Study of Stakeholders in 2010 told us: • Almost 50% of respondents believe that internal auditing does not excel at developing talent for leadership positions throughout the organisation • With Directors this is 42% • With Audit Committee Chairs it is 50% • With CFOs it is 62% • Almost a third do not believe that internal audit has a role to play in strategic risk

9. What is the future… Our CAEs tell us: We are doing well The CEOs and Audit Committees say: You need to do a lot better Who is right? It doesn’t matter – we have to be relevant

10. The Future Leader The Future Leader has to • Be aware of his/her limitations • Have integrity • Be a trusted adviser to the Board • Work in Partnership with the Audit Committee • Have an executive presence • Be relevant • Understand the Business • Be an expert relationship manager • Comply with Professional Standards

11. The Future Leader… Is aware of their limitations • We are not all Einstein and cannot always know the right answer – accept it and work with it • If we do not know, then do not offer or if you offer get the right person in to do it. • Internal Audit will not always have the answer – be aware of this

12. The Future Leader… Doing what is RIGHT even when it is difficult Has total integrity & courage • Ensuring strict adherence to the Business Code of Conduct and the IIA Code of Ethics • Encouraging integrity in others through example • Being totally honest in all dealings • Having strong moral principles and living up to them

13. The Future Leader… Is a trusted adviser to the Board, through: • Gaining the trust of the Board, providing • Detailed knowledge of the business in their own right and by the Internal Audit Unit • Reporting that adds value to the organisation, by providing solutions • Non-partisan use of information learnt at Board level

14. The Future Leader… Works in Partnership with the Audit Committee The Audit Committee will be a strong supporter and/or a loud critic Do not just report to the Audit Committee, involve them • Have informal and formal meetings with the Chairman • Provide briefings on the pertinent matters of the day • Offer advice on actions that need to be taken

15. The Future Leader… Has Executive Presence • Take command of the room • Leverage your influence to enable effective decisions • Listen to others • Inspire those around you to peak performance

16. The Future Leader… Is Relevant • Knows the business • Makes reports at the right time, the right place and with the right emphasis • Makes the business want Internal audit • Listen to the Chairman’s message on AuditChannel.tv

17. The Future Leader… Understands the Business Links to all the others • Has a detailed knowledge of the business, • how it works • What it is attempting to achieve • What the risks to the business are • Who is important and why

18. The Future Leader… Is a good Relationship Manager • Identifies and understands the needs and requirements of those around them • Listens carefully to what is said • Understands the dynamics between members of the Board and between the managers within the organisation • Makes sure that managers/directors own the solutions

19. The Future Leader… Ensures compliance with Professional Standards • 90% of stakeholders indicate that adherence to the Standards increases their confidence in internal audit • More than 70% percent believe compliance with the Standards is a key factor in the ability of IA to add value to the governance process • …Yet up to 60% of internal audit departments still have not undergone an external quality assessment

20. Conclusion The Future Leader of Internal Audit will make certain that internal audit • Is Relevant • Is Business-like in its approach • Understands the business • Offers solutions • Works for the business • Is professional In short, Internal Audit Adds Value

21. Thank you Phil Tarling Office: +441256868974 Mobile: +447802656986 Email: phil.tarling@huawei.com