This is part two of a four-part series on how internal audit departments can benefit from a customer-service approach to auditing. See, part one, The Customer Service Oriented Internal Audit Department.
Over the past few years, more internal audit departments are seeking to shed their reputation as the company's monitors and provide more value and service to those they audit. But how does internal audit know if it's meeting those goals? Some are simply asking.
Borrowing a common tool of the customer service department, more internal audit departments are turning to customer satisfaction or exit surveys to gather feedback on audits from the auditees' perspective with an eye toward improving the audit experience and proving more value to process and function owners.
To truly employ a customer service approach, internal auditors need to know how the departments and individuals they work with view their interactions. Did they find the internal auditors with whom they worked considerate? Did they find the auditors competent and knowledgeable? Did the auditors take the auditees' schedules and time constraints into account when developing the audit schedule? Did internal audit provide useful and actionable information to make improvements in processes?
While informal feedback—say, a conversation in the hall or a quick email—may provide some of this information, customer satisfaction or exit surveys can help galvanize a continuous improvement effort and customer service oriented approach. "Internal audit functions that actively seek client feedback through exit surveys are certainly at the top end of the best practices spectrum," says Joseph Mauriello, director of the Center for Internal Auditing Excellence at the University of Texas at Dallas.
Karen Visser, internal audit project manager at medical products company Hologic, says her department uses surveys to bolster its efforts at "continuous improvement of the internal audit processes." The surveys also can provide an early indicator of potential client dissatisfaction, she adds.
More audit departments are, like Hologic, catching on to the benefits of post-audit surveys. According to the Global Internal Audit Common Body of Knowledge (CBOK), a project of the Institute of Internal Auditors Research Foundation, just 9 percent of respondents said their audit departments were using such surveys in 2010. By 2015, that number had jumped to 50 percent. Keith Kawashima, managing director in the internal audit practice at global consulting firm Protiviti, says the results confirm what he's seen: a big increase in interest from internal audit departments, particularly ones at larger companies, in conducting such surveys.
Other studies point to the effectiveness of two-way communication, including gathering feedback on performance. In its 2016 State of the Internal Audit Profession Study, consulting firm PwC conducted nearly one hundred interviews about the characteristics that define top leaders. Communication ranked among the top five. "Very effective leaders have the confidence to routinely solicit feedback from stakeholders to foster continuous improvement," the report notes.
Most customer satisfaction surveys issued by internal audit departments are similar to those used by any number of service professionals. For instance, the internal audit exit surveys conducted by semiconductor company Analog Devices asks respondents to comment on eight statements. Some of the statements include: The objectives of the audit were clearly communicated to me; internal audit minimized disruption in my department; internal audit took time to understand my business, the processes, risks, opportunities, and controls; and the audit report was accurate, relevant, clear, concise, and timely.
"It's the nitty gritty of field work," says Gretchen Sutcliffe, senior manager of internal audit at Analog Devices. The focus is on the client's experience with the audit process, rather than the audit results. The surveys are sent to the individuals with whom the auditors interacted most closely, she says. The audit director sends an email with the survey, and copies the chief accounting officer, who has administrative oversight for the internal audit department.
The format of the surveys changed a few years ago, as Analog Devices wanted to boost the value of the responses it received, Sutcliffe says. It had been asking respondents to rate statements like, "the objectives were clearly communicated," on a scale of one to five. However, respondents tended to simply circle a number, which rarely provided much insight. While many responses under the new format, in which survey respondents are asked to comment on the questions, are short, some auditees write paragraphs, Sutcliffe says. The results go to Analog's audit director and chief accounting officer. In addition, more substantial comments—say, an observation that one audit should have been split into two—are presented to the audit committee.
Hologic takes a similar approach. Audit satisfaction surveys include a mix of agree-or-disagree questions and open-ended questions, Visser says. The agree-or-disagree questions address how well audit scope was communicated, and the timeliness and helpfulness of the report, among other subjects. "The open-ended questions provide an opportunity for the client to share their thoughts on things we did well, things we could improve, and other areas they recommend for audit," she says.
What to Do with the Results?
Once audit departments decide to conduct a customer satisfaction survey, they have to decide how to use the feedback. Internal audit experts say it's a bad idea to conduct surveys if you don't plan to let them influence how you operate. Anytime individuals are asked for their opinions, they expect them to matter. "The act of seeking client feedback is not a substitute for taking action," Mauriello says. Acting on credible, constructive customer feedback contributes to quality improvement, he adds. It also lets auditees know the request for feedback is not just a formality.
Hologic's Visser says survey results have helped the company's internal audit department identify opportunities for improvement. A case in point: based on feedback, the department strengthened communications about the audit process, particularly on what auditees can expect to happen during the process, when it will happen, and how much time it will require of them.
In another example of how companies put the survey results to work, Protiviti's Kawashima recalled a survey in which respondents indicated that internal audit lagged in closing its audits. The department added several weeks at the end of each audit to allow auditors time to write the reports.
Just Part of the Picture
Of course, surveys alone aren't enough. They need to be part of an overall customer service ethos. For instance, Analog Devices strives to keep audit periods short—about five weeks for field work, and another two to three weeks for reporting—and communicates regularly during that time, Sutcliffe says. The point is to minimize disruption to the process or function the internal audit team is auditing.
Analog also presents the timeline upfront and then regularly communicates its progress. The result? "Customers come out rather pleased with the audit process," says Brian Rourke, internal audit manager, also with Analog.
While organizations that use customer satisfaction surveys find value in them, some auditors question whether their use can influence audit results. "One concern would be that auditors would be tempted to suppress or de-escalate audit findings in an attempt to gain better customer feedback," says Jami Shine, corporate audit manager with QuikTrip Corporation, a Tulsa, Oklahoma-based convenience and gasoline retailer with more than 700 stores.
In response, others point out the surveys focus on the audit process, not the results. "We don't ask 'did you agree with the opinion,'" Rourke says. "It's 'did we follow our process?'"
At Massachusetts Institute of Technology, survey results go directly to the manager of quality, and not to the audit team, says Kimberly Ahern, who occupies the role of manager of quality. While Ahern shares the survey results with the engagement team during an audit debrief, they're not linked to anyone's performance review," she says. "If you're tying results to internal auditors' performance reviews, it could possibly encourage auditors to compromise their objectivity."
Even so, some have found surveys appear to reflect audit results, rather than the process. John Gallagher, director of internal audit at SEFCU, a $3.3 billion credit union based in Albany, New York, says his four-person audit team used to conduct surveys, but stopped when it found the survey results appeared to align with the overall audit rating, he says. "If the audit results were positive, the survey was more positive. If the audit results were negative, however, the survey ratings were lower." This happened despite Gallagher's efforts to explain the purpose of the audits was to assess the risk of the area—not to conduct a performance review of those working in it. On other occasions, audit clients at SEFCU decided not to take a stance on the how the audit was performed. Some respondents would answer every question with a three, on a scale of one to five. "It's a safe zone," Gallagher says. "But what does that tell me?"
No Replacement for Relationship Building
Gallagher and his team now obtain feedback through exit meetings and ongoing relationships. At the exit meetings, auditees see a draft report of the audit and can let auditors know if they've misconstrued or misinterpreted anything. Gallagher also asks for feedback about the audit process itself and its value. He also makes a point of interacting with management throughout the year. "It makes it more real time and conversational," he says.
QuikTrip's internal audit department uses 360 evaluations, Shine says. Internal auditors receive feedback from five peers and five customers, among others, regarding about the auditor's competence, attitude, and other attributes. The auditor's supervisor reviews the results, but the evaluations don't go into the auditor's personnel file and the auditor doesn't see them, she notes.
While customer satisfaction surveys may not be a panacea, their use is likely to grow. "If you're striving to comply with IIA standards, one element is ongoing improvement," Kawashima says. Feedback from customers can help audit departments intelligently focus their efforts to improve the services they provide.
Karen Kroll is a writer and editor based in Minneapolis, Minnesota.