Is your risk manager helping you maximize revenue?

Studies show that companies lose between 2% to 5% of profits due to revenue not billed or accounted for. This is shocking since the company has already incurred costs and provided the product/service to the customer. Given the regulatory pressure and increased compliance requirements the focus of risk management teams and internal audit functions has shifted from this area as they feel that this is something that would be high on all business owners radars since revenue targets have the most weight-age. However, the incentive plans alone are not a foolproof mechanism…

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Who really wants an independent Internal Auditor?

The Institute of Internal Auditors Guidance Standard 1100 – on Independence and Objectivity states that  “The internal audit activity must be independent, and internal auditors must be objective in performing their work”. However, in who’s interest is this independence? Share holders, employees, management or board of directors? All of them right? Yes, until there is an audit finding :-). In fact, the share holders and board of directors are the ones who are really interested in the independence of the internal audit function. Since, they rely on the function to ensure the…

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Audit IT without IT audit staff

In the early 1990s auditors (internal or external) never really looked inside the IT infrastructure of a company and it was treated like a black box. During an audit transactions were audited as if the IT applications did not exist. Then came the wave of specialised IT audits who could open the black box and identify numerous new risks associated with the complex workings inside the servers, computers and applications used. The financial/operational auditor could never really understand these risks and full reliance was placed the IT auditor. However, in…

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Think Business Continuity in a Start-up

Events like 9/11 and tsunami hitting Japan after the Tohoku Earthquake in April 2011 have emphasised the importance of planning for business continuity and each new event has forced companies to think about new aspects when planning for business continuity. For example 9/11 made companies sit up and think about offsite storage of key documents and stopping of manufacturing of specialised chips in Japan after the tsunami made companies relook at their supply chains and critical vendors. Ensuring that you can run your business and service customers after a business disruption…

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Back Ground Verification – Important in everyday life also

I along with Bangalore are shocked to follow the recent events involving the rape of a six year old girl in a Bangalore school. Yesterday the Bangalore police arrested a skating instructor on suspicion of being involved and as I read about the arrest (Bangalore school rape case: Skating instructor arrested) and saw the news stories, the panic level started to increase.Especially, when we realised today that the person who was arrested had taught my daughter to skate a couple of months back! Imagine how close she came to an incident like this!The articles…

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Hiring for Internal Audit – Everyday Challenge

I recently read an interesting post by Norman Marks on risk management where he posed a question to a Big 4 consultant and didnt get a answer. The question was about managing risk when hiring someone. You can read the full post here (http://normanmarks.wordpress.com/2014/06/21/a-risk-management-challenge-for-you/). This got me thinking about hiring for Internal Audit. Given the importance of the function and the absolute need to have skilled staff, how do audit functions ensure they get the right people. Having hired for a number of years now in India, I can tell…

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Professional Practice teams within Internal Audit Functions – Value Add?

Digressing a little, but think it is relevant to audit functions today… The Global Financial Crisis raised a number of questions on how risk management functions were run in financial services and also raised a few questions on the internal audit functions. As a reactive measure the regulators started to pay more attention to the internal audit (IA) departments. In turn the IA departments especially in financial services, setup professional practice functions as an internal check on quality of the function. The professional practice departments were also charged with additional…

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Risk Management in a Start-up

So you thought of a great idea and have decided to start a new venture. There are almost a million articles on the internet about how to start up, launch your product, acquire customer, raise money etc. I know, because I have been thinking about doing something on my own for about 6 months or more and have read enough of these articles. Being an auditor, I was interested to learn about things that can go wrong and found this one articles (5 Common Startup Mistakes That WIll Sink You…

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Risk Appetite a new perspective

I was recently working to prepare the audit plan for a client and it got me thinking about risk appetite and is it really used in the right light. External Auditors have always used the concept of materiality as their responsibility is to give a true and fair view of the financials, this concept also allows them to not audit everything in the company and limit the resources needed. When a company uses risk appetite they are also applying the materiality concept to say where the that risk and control…

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Back to Basics – Risk Appetite

I recently found this blog post on IIA website about risk appetite, you can refer to it here http://normanmarks.wordpress.com/2013/09/23/what-is-your-risk-appetite/. The author of the blog has explained risk appetite quite well using driving a car as an example. I feel risk appetite is an important concept that is not always utilised because it is diffcult to explain and put in monetory terms. I have rarely found someone using this concept when discussing audit issues or defining materiality levels for testing. But if you really look at it, the risk appetite is…

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