A slightly edited version is published on 16 September in the Online Forum of Straits Times
12 September 2013
I wish to make some suggestions in response to the letter from Ms Deon Chan Siew Fong (Timely to rethink value of internal audit, ST 11 September).
Ms. Chan said that internal auditors should be a part of the management team and not be perceived as "nitpickers" who sound false alarms over insignificant human oversights.
I agree with her approach. The problem lies with the current approach, which require the business to lay down its standard operating procedures (SOP) and the internal auditor to audit the activities according to the SOP.
Most SOP are written in a detailed manner and do not provide for flexibility, common sense and judgement in taking decisions. There is too much emphasis on compliance with the SOP and a lack of understanding of the purpose of the business or of the SOP.
The purpose of a business is to make transactions that produce a profit. The purpose of internal audit is to ensure that the employees who are trusted to carry out the transactions act honestly, diligently and responsibly.
The purpose of the SOP is to guide the employees and the internal auditor on what are needed to achieve the goal. The SOP should not be followed blindly, without regarding to the underlying goal. If this is recognized, there is no need to sound alarm over insignificant non-compliance.
We need to change the mindset and empower internal auditors to approach their work with the aim to find out how the employees are doing right, and not what are wrong. In the process, they will detect what does not seem to be right and can discuss the issues with the relevant people.
What is not right does not mean that it is wrong.
By adopting a positive approach, internal audit will be able to carry out its role in a more productive manner. There will be a small percentage of cases of dishonest activities, which are more likely to be identified with a positive approach.
Tan Kin Lian