Analysing the State of Consultancy in the Present Era

By Taheer Afzal, CEO, 7T3

Can Auditors be Consultants?

Can we do everything we want with the staff we have? Do they know everything they need to know to help drive business improvement? Probably not! That is why we engage consultants.

Consultants offer a fresh perspective on your business. There are two primary reasons why consultants are engaged and that are Resource and Expertise. From the resource perspective, there is absence of fixed overhead expense and the benefit of no permanent distraction of key staff on the project prevails. But, consultants are also engaged so that the client can benefit in terms of their expertise and experience from other projects. Consultancy can help companies gain a competitive advantage.

Using a consultant is the embodiment of the maxim- “no pain no gain” because consultants are typically called on when clients want to embark on change. For many within the organisation, change is not good.

Objectivity and Independence

The parallel and the binding tie between the auditor and the consultant is the objectivity that they can bring to the situation. One of the main reasons why consultants are engaged in projects is to ensure that internal resource is not overloaded with their own day to day job as well as the project. But also because internal employees often get too close to the projects they are working on and can lose their independence and objectivity. The first rule of an auditor is to remain independent and objective when performing the work and to give an unbiased opinion based on facts.

Similarity of Day to Day Tasks

The day-to-day activities of auditors during an audit are similar to management consultants. Typical tasks include carrying out research, conducting analysis, interviews and facilitating workshops, managing projects, leading and managing those within the team and a lot more.

At the moment- the main difference between Audit and Consultancy is that Audit does not and should not be involved with the implementing of  recommendations/solutions otherwise this can lead to conflict of interest.

Skills and Experience Matter

The reason we choose people to do a certain task is because we know they have done it before and they know what pitfalls to expect along the way and how to avoid them if planned correctly. Auditors, both external and internal, tend to move a lot between organisations and can also bring their experiences of past project successes to the table. The consultant is not a magician. He is unable to pull the rabbit out of the hat and especially not without knowing anything about your business. The key to good consultancy is in the understanding of the client.

Stakeholder Management

Apart from the CEO and to a lesser extent the Main Board, Internal Auditors have the best view of the entire organisation. With an understanding of the strategic, tactical and operational level difficulties and challenges, they know about the interactions one particular course of action may have on another function or department. They are in a good position to assess the likely outcome of decisions.

Limitations in the Role of Internal Audit Consultancy

The major difference between an in-house auditor and a consultant is that the Auditor can help as a consultant in the design providing a project oversight role too, but they should not be involved in the operational execution and decision making which can cause the fear of conflict of interest.

Key Challenges

Any project whether it has the auditor involved or not will face the challenges. 

Conduct and Culture -

High profile cases of corporate scandals in the Far East involving Toshiba and Olympus were clearly prolonged by the country culture. There are similarities between the culture in India and the whole subcontinent as well as the Far East when it comes to the impact of the country’s culture on organisations. There is a hierarchical culture ingrained into daily social life which people appear to take into their offices and results in unwillingness to be the one to put their head above the parapet to expose corruption for fear of repercussions. The absence of women in senior positions also affects a company’s culture and can be analysed in length separately.

The companies here have a long way to go to get it right. Auditors can assist in reviewing the company’s culture and making suggestions for the elements of code
of conduct.

Customer Service- Managing the Needs and Perceptions of Stakeholders

It is important to persuade/convince/remind and reinforce the organisation that the output of the project may be a new process with a revised IT solution, effective consultancy is not simply the domain of the IT department. You don’t have to be an expert in IT to be an expert in project management.

Many people still consider it to be better if the project manager is not an IT guy and IT is simply a stream/project team member. It is about getting the balance between data and information right. Internal audit’s knowledge of analytics can help avoid information overload, filtering out data and turning it into information and then reporting it in a way people can understand.

Other Benefits of an Audit Consultant

In the Tech space- from an audit perspective- all the research being done for the fact that technology related risks now form the main strategic risks that most organisations now consider as part of their top priorities. Internal Audit can be actively involved in these areas conducting reviews of cyber security especially with many companies now operating on cloud based systems, application controls in General IT controls environment, Business Continuity Planning and Disaster Recovery as well as providing assurance on 3rd parties used by organisations e.g. logistics providers or outsourced payroll providers.

The benefit of a strong Audit function that offers both assurance and consultancy is obvious. There is a strong value added to the organisation not only with reference to business and commercial terms but also in terms of management of reputation risk and improvement of corporate culture. Auditors can strike the right balance between business partner/consultant being both critical friend and policeman and can make the project successful in a controlled way. 

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