Ever wondered who the first internal auditors were? What skills they applied? What enterprises solicited their services and why. Those who know me, know I’m a firm believer in the idea that there is nothing new under the sun. Finding out the history of a profession and it’s evolution often reveals a lot more about the enterprises and stakeholders to whom the profession renders service. Such discovery is the best career advice to give to young people making up their minds on what they want to do.
I’m very often called on to provide introductory primers to audiences of nonprofit implementers on what internal audit is and even on “how to pass the audit”. I love doing it. I reveal novel insides like “auditors are people” and “don’t upset the auditors”. As I do, I sit back in my mind and marvel at audience reactions. You will be surprised how many people don’t know internal auditors are people. I also love giving insides on how to pass audit. It helps me dispel the fallacy that we auditors are some sadist evaluators looking to fail people, on job exams of sorts. All of that wrong on many levels.
One story I often invoke, in part to spice the conversation but equally to remind people of the organic basis for auditing is Shakespeare’s the Merchant of Venice. Imagine it. The people signed up for an internal audit introduction and then get to hear about Shakespeare’s work. So what‘s the connection? If you are like me and had to read the play in middle school, I hope you were as fascinated by “all that glitters is not gold” revelation in Act II, after all, is that not one lesson we all continue to learn in our adult lives and in the practice of audit? We call it professional skepticism today. But that was just the first digression. The play opens with a sad merchant, worried by the faith of his big bet investments. He has in effect placed all his eggs in one basket, in his case, vessels at sea. Another lesson on risk management and a second digression on my part.
The real lesson to draw in my view is what is missing from the merchant’s enterprise – an internal auditor. Many have questioned why Antonio (the merchant) was sad in the opening act of the play, filled with “melancholy”. Was it for his friend embarking on the consuming enterprise of marriage, that would take him away from their time together? Was it for parting away from his goods on vessels at sea? Was it for the unsavory feeling of making exorbitant profits like Shylock, the Semite he abhorred? I say Antonio was faced with a corporate governance challenge, impacting many stakeholders. An internal auditor could have helped him to examine the governance, risk management and control framework for his enterprise and activities. Consider the issues, financial risks of too much debt or loss due to pirates, market/demand risks if he invested in the wrong goods, operational risk if his ship captains failed to navigate safely, hazard risks from the seas, the social scorn from executive remuneration etc. His friends and collaborators tried, in their ways to be auditors of sorts, hinting at risks. He was sad and did not know why because the internal audit profession had not yet been created. Everyone paid dearly for not having auditors.
Nonprofit Auditor 