“La Misión de la Auditoría Interna:
Mejorar y Proteger el Valor de las Organizaciones”
16 – 19 Octubre, 2016
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About the Speaker
Naren Aneja is the Chief Executive of Aneja Associates, India. He is a
Fellow Chartered Accountant, Certified Internal Auditor, Certification in
Risk Management Assurance (CRMA) and holds an MBA from the
Wharton Business School. He is a Gold Medalist (ICWA), a Tata Scholar
and was ranked on the Director‟s List at Wharton School (1978). He is a
past national President of The Institute of Internal Auditors of India and
of the Asian Confederation of Institutes of Internal Auditors (ACIIA). He
is a Director-at-Large, IIA Global Board, on the Advisory Board of the
Bharti Institute of Public Policy and on the Audit Committee of the Asian
Football Confederation (AFC).
Naren Aneja
MBA (Wharton), CIA,
CRMA, FCA
Chief Executive
Aneja Associates
Naren, as he is fondly called, has made presentations at many
international conferences in India, United States, Malaysia, Dubai, Sri
Lanka, Qatar, Philippines and Thailand.
He has over 30 years of experience in GRC (Governance, Risk and
Compliance) assignments and management consultancy. Naren is the
managing partner of Aneja Associates having about 350 professionals.
His Firm conducts governance studies, risk assessments, management
and operational audits of over 200 companies, in India and abroad.
Aneja Associates
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‘MANAGING DILEMMAS IN
INTERNAL AUDIT”
NAREN ANEJA
MBA (Wharton), CIA, CRMA, FCA
Chief Executive – Aneja Associates
Aneja Associates
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Dilemma 1 : Challenges to Independence

Independence is at the core of the function

Independence is part of definition of IA

Statutory auditors
independence

Dilemma : Disclosure of rouge / semi rouge management
actions
reliance
on
IA
rests
on
IA
 „Go with flow - do not make waves‟,
 „Let sleeping dogs lie‟,
 „Tone down recommendations for Audit Committee‟
Aneja Associates
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Dilemma 1 : Challenges to Independence
Situations challenging Independence : Examples
 Overstatement of sales (Real estate)
 Rogue trade (Financial services)
 Provision for doubtful debts (Financial services)
 Statutory liability (PF)
 Scope compromise
 Restricted access to data:
 No access to accounting records (Hospital)
 Withholding concurrence on reports with unpleasant
ratings
Aneja Associates
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Dilemma 1 : Challenges to Independence :
Responses
 Understand reasons for such requests:
 Difficult committees… cooked spaghetti becomes tense.
 Non-disclosure of material facts

Raise issues which dampen independence with Audit
Committee – seek private meetings with Audit Committee

Ensure implementation before ACM

Set materiality and ethical thresholds

Be clear on “No compromise” situations
Cont’d…
Aneja Associates
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Dilemma 1 : Challenges to Independence :
Responses

IIA Research Foundation Study „Audit Committee
Effectiveness‟ : Culture and compliance are the „soul of
accountability‟; tone at top is about „creating a culture
where everyone feels responsible for doing the right
thing‟.

Help create ethical climate in organisation

Emphasize implementation of corporate governance
norms in company
Aneja Associates
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Dilemma 2 : Managing Stakeholders’
Expectations

Conflicting demands of Audit Committee /
Management :
 Audit Committee Expectation : Evaluation of
Risks and Controls
 Management
Contributions
Expectation
:
Value
Add
Aneja Associates
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Dilemma 2 : Managing Stakeholders’
Expectations : Responses

Educate Stakeholders (TCL), BIL – Operational Issues

Define priorities in Internal Audit Charter

Allocate time in Annual Audit Plans

Express risk / control improvements in value add
terms : CIV, PIV, CLV (VAI – TPC)

Define parameters for performance assessment

Karva Chauth fast
Aneja Associates
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Dilemma 3 : Relationship with Auditees

Social interactions
 Personal & family

 Big cities & townships
Gifts
 Value
 Timing
 Garment trading
Aneja Associates
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Dilemma 3 : Relationship with Auditees :
Responses

Draw the line: How far is close? How close is far?
 Leave friendships out of the meeting room
 Exhibit professional conduct at all times and develop
reputation for being fair
 Follow company policies as if you were an outsourced
service provider
 Do not let friendship influence decisions on reporting audit
issues – Wh. MG
 Set your moral compass due North – Do you feel
compelled to return the favour?
Overarching Principle :
“Influence on thinking or approach”
Aneja Associates
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Dilemma 4 : Balancing Independence
with Partnership

Number of oversight agencies on the increase
 Chief Compliance Officer,  Chief Technology Officer
 Forensic Auditors
 Chief Risk Officers – Indian
requirements




New requirements leading to confusion vis-à-vis coverage, scope,
approach, priorities, duplication
Businesses getting more complex, complicated and confusing –
need to collaborate
Will IA be superseded / made redundant with specialist functions
Whilst IA is an “independent objective assurance and consulting
activity” – how to maintain balance between independence and
partnership?
Aneja Associates
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Dilemma 4 : Balancing Independence
with Partnership : Responses
Alignment leads to :
 Optimum use of resources, improved coverage of risks and
controls
 More holistic assurance to the Board
 Segregate audits which require “auditor independence” and
which are collaborative and consulting in nature
 IA needs to take leadership role in partnership – leadership
emotes from its “independence” – convince management of IA
strategic and unique perspectives
 Formalise roles in IA Charter and obtain AC approval for
redefined roles
 South Africa Governance Report – Mervyn King Committee

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Dilemma 5 : When the AC is not your
‘Friend, Philosopher and Guide’ (FPG)

When the AC does not ‘LISTEN’

When independent Directors are not truly
independent

When the ‘marriage’ is a farce – a 3 ring
circus

AC Chairman resignation
Aneja Associates
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Of Marriages and Audit Committees

A woman worries about her future until she gets a
husband – A man never worries about the future
until he gets a wife!

Love means – never having to say sorry – marriage
means – listening to why you should be sorry!

On quite nights, when I‟m alone, I like to watch our
wedding video backwards, just to watch myself
walk out of the church, a free man
Aneja Associates
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Dilemma 5 : When AC is not your FPG :
Responses





Take conscious efforts to build relationship with AC
Chair
Develop relationship with AC members to tackle
prickly problems, even unofficially / individual basis
Make AC members aware of stakeholder expectations
and consequences / penalties, etc.
If warranted, approach other members of Board.
In extreme situations, quit!
Aneja Associates
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Dilemma 6 : Developing Ethical Intelligence
Mark Twain : Good friends, Good books and
a sleepy conscience… that is the ideal life
Institute for Global Ethics : Unethical Leaders :
 Are influenced more by personalities than by principles
 Are intolerant of ambiguity and personal loss
 Seek immediate gratification and simple rewards
 Lack persistence and determination
 Do not think independently
 Why ethical failures happen :
 Lack of sensitivity to an ethical issue
 Lack of time to analyze a situation in-depth

Cont’d…
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Dilemma 6 : Developing Ethical Intelligence

1.
The ability to discern when and where there are ethical
implications in an issue and being able to respond
appropriately from an ethical perspective – Dr. Claudelle Von
Eck
CASE STUDIES
You are driving on an extremely stormy night and at a bus
stop you see :
 An old woman who looks as if she is about to die
 An old friend who had saved your life in the past
 Your dream lover whom you would like to marry
What will you do? You can take only one person in the car
2. Titanic survivors
Aneja Associates
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Dilemma 6 : Developing Ethical Intelligence :
Responses

„Ubuntu‟ – “I am, because you are”

„Do unto others as you would have them do unto you‟

Have courage to tell the emperor what clothes he is
wearing

Ethical / moral principles that govern behavior or activity

Discuss problem with peers, AC, to get clarity

Influence culture in the organization… think of the
glowworm
Aneja Associates
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Dilemma 7 : Is Internal Audit a Profession?
Elements of a Profession :
 Body of knowledge
 Certification and CPE
 Disciplinary Actions / Code of Ethics
 Act for Public Good
 What comes first : Organisation or Public Interest
 Should IA be a whistleblower for regulatory authorities?
 Examples :
 Profit enhancement
 SO2 emissions
Aneja Associates
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Dilemma 7 : Is Internal Audit a Profession?
Responses

Ask management and audit committee to
address / debate issue

Set your ethical intelligence

Djokovic Guidelines
Aneja Associates
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How to Face Difficult Situations
“The first thing is to make sure you are in the moment. You have to
exclude all distractions and focus only on what you are about to do. To
get to that state of concentration, you need to have a lot of experience
and a lot of mental strength. You are not born with that. It is
something you have to build by yourself.”
“I believe that half of any victory is in place before you step onto the
court. If you do not have that self-belief, then fear takes over. And then
it will get too much to handle.”
“Everyone feels fear. I don‟t trust a man who says he has no fear. But
fear is like a passing cloud in the sky. After it passes, there is a clear
blue sky.”
- Novak Djokovic
Aneja Associates
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THANK YOU….
NAREN ANEJA
MBA (Wharton), CIA, CRMA, FCA
ANEJA ASSOCIATES
Email : [email protected]
Contact No. : +91 98210-67164
Aneja Associates
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¡Thanks for your Attention!
QUESTIONS
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