Enhancing the role of auditing to boost organisational capability

Traditionally seen as a means to ensure compliance and accuracy, auditing is evolving into a powerful tool that can significantly enhance organisational capability, sustainability, conformity, resilience and performance. By expanding the role of auditing, organisations can leverage auditors not only as watchdogs, but also as strategic partners who contribute to the long-term success and viability of the organisation.

Evolving role of auditing

Historically, auditing has focused on verifying compliance with documented requirements. Auditors have primarily been responsible for identifying discrepancies, inaccuracies and noncompliance issues, emphasising tangible, objective evidence that verifies the effective implementation of planned arrangements.

While these functions remain crucial, the scope of auditing has broadened over time. It now encompasses various aspects of organisational operations, including risk and capability management, understanding organisational culture and behavioural patterns, and focusing on outputs and outcomes.

This evolution does not imply that traditional methods are wrong; rather, it reflects a shift towards incorporating different academic perspectives, particularly the impact of culture on organisational capability.

The key question is how this affects the purpose of auditing and its value proposition to users. As auditing evolves, it must better align with the needs of its users by providing insights that address a broader range of organisational dynamics and performance indicators.

Expanding auditing value proposition

To fully realise the potential of auditing, it is essential to redefine its purpose and enhance the auditor’s role within the organisation. This involves shifting from a purely compliance-based approach to a more strategic, value-added function.

The following are five key areas in which auditing can make a substantial impact.

1. Increasing organisational capability

• Traditional auditing relies on objective evidence from documents, which primarily shows past compliance. However, understanding the impact of people’s behaviour on results and outcomes is crucial for a comprehensive assessment.
• Conformance is the lowest acceptable standard and just one point on the effectiveness spectrum. Capability involves moving beyond mere conformance to demonstrate the ability to achieve desired outcomes. Effective auditing should evaluate and enhance organisational capabilities.

"By redefining the purpose of auditing and expanding the auditor’s role, organisations can unlock new levels of value and achieve greater success in today’s competitive and ever-changing business landscape."

Ian Rosam CQP FCQI, Chief Product Officer at DeepFathom and a member of the CQI Audit special interest group

2. Reducing auditing costs

• Investing solely in compliance-level auditing, whether through third-party or internal audits, can be costly because of sunk costs and additional investment for any improvements beyond compliance.
• A blended approach that merges traditional auditing techniques with cultural assessments can optimise the strengths of each method, enhancing the value of auditing and the risk-based insights it delivers, without necessarily increasing costs.

3. Developing the auditor's role

• The auditor's role should evolve from merely being a compliance watchdog to facilitating organisational capability. This involves understanding organisational culture, compliance requirements, and expressing risks to the delivery of what senior managers, in their respective roles, are charged with managing within the finding.
• By providing action plans to reduce risk and enhance the ability to achieve objectives and desired outcomes, auditors become facilitators of change.
  This shift ensures that audit results are business-centric, not just compliance-centric. Here we are not talking about consultancy, defined as giving people the answer or a solution to a problem, but aiding the creation of a solution through a suggested action plan.

4. Enhancing strategic insight

• Auditors should provide strategic insights that go beyond identifying discrepancies. This includes evaluating how effectively an organisation manages risk, capabilities, and cultural factors that influence performance.
• Such insights help organisations align their operations with strategic goals and improve overall effectiveness.

5. Aligning with user needs

• As auditing evolves, it must better align with the needs of its users by offering insights that address a broader range of organisational dynamics and performance indicators.
• This approach enhances the value proposition of auditing services, ensuring they meet the evolving demands of stakeholders and contribute to long-term organisational success

Conclusion

By embracing a more strategic and value-added approach, auditors can become vital partners in the pursuit of organisational excellence. This transformation not only benefits the organisation, but also strengthens the overall impact and relevance of the auditing profession in today’s dynamic business environment.

Moving beyond traditional compliance roles means auditors can drive organisational improvements in several ways. They can identify areas where efficiencies can be gained, risks mitigated, and capabilities enhanced. Furthermore, auditors can provide insights into how organisational culture impacts on performance, thus helping organisations to align their strategies with their operational realities.

Reducing costs associated with traditional auditing methods and adopting a more integrated approach means organisations can maximise the return on their auditing investments. This not only makes the auditing process more efficient, but also ensures that it delivers greater value to the organisation.

In developing the auditor’s role, it is crucial to focus on fostering a deep understanding of the organisation’s culture and operational context.

Auditors should be seen as facilitators of change, working collaboratively with management to develop action plans that address identified risks and enhance organisational capability. This proactive approach ensures that audit findings are not merely seen as criticisms, but as opportunities for improvement and growth.

Strategic insights provided by auditors can help organisations to navigate complex business environments and make informed decisions that drive success. By evaluating how effectively an organisation manages its risks and capabilities, auditors can provide valuable recommendations that support strategic planning and execution.

Ultimately, aligning auditing practices with the needs of users ensures that the auditing function remains relevant and valuable. By addressing a broader range of organisational dynamics and performance indicators, auditors can contribute to the long-term success and sustainability of the organisation.

In summary, the evolving role of auditing presents an opportunity to enhance organisational capability, sustainability, conformity, resilience and performance. By redefining the purpose of auditing and expanding the auditor’s role, organisations can unlock new levels of value and achieve greater success in today’s competitive and ever-changing business landscape.