Jump-starting the Conversation Between Boards and Auditors
Posted on April 4th, 2008 by Julie Garland McLellan »Permalink
I so often hear (from auditors) that boards don’t listen to their auditors or (from boards) that auditors don’t talk in a way boards can understand or use. It really is sad that such an important conversation so frequently leaves both participants unsatisfied.
The best way to get the conversation started, in my experience, is for the parties to come together to discuss what are the key strategic risks and then what are the likely best key performance indicators (KPIs) to monitor these risks. As a general rule directors are more interested in the strategic information that will affect future performance than in the financial information that depicts past performance. Unfortunately most of the information directors get given by auditors or risk managers seems to be past oriented and financial rather than future oriented and focussed on the activities that will cause the financial performance.
Starting the conversation as an inquiry with both sides suggesting things topics for investigation and KPIs that would provide a meaningful indication of likely future performance is far better than starting the conversation with one party reporting to the other.
It is healthy for the audit committee or board to meet with the auditors and internal auditors without management being present. This does not mean that the board distrust management just that the conversation is different when management is not present. Simple measures such as inviting the internal auditor to accompany the board when they make a visit to an operating site will help to build shared understanding and common values. It is imperative the board meet the internal auditor more than once a year and that each meeting is constructed to achieve specific outcomes rather than just to wade through specific reports.
Tags: auditors, corporate boards, KPIs
Julie Garland McLellan has over 20 years experience in strategic business development in resources, utilities and energy industries. She is currently a corporate governance consultant with Blackrock ITS, a leading Australian IT services and solutions firm. Previously, she served as associate director with McLennan Magasanik Associates, and a board member of the Victorian Minerals and Energy Council, the Victorian Energy Networks Corporation (VENCorp), the Melbourne University Engineering Foundation and City West Water. Julie has an honours degree in civil engineering from City University in London, an MBA from the leading Spanish Business School (Instituto de Empresa in Madrid) and is qualified in finance and corporate governance.
March 5th, 2009 at 1:37 am
Wow! Thank you! I always wanted to write in my site something like that. Can I take part of your post to my blog?