As business processes become more complex, information more widely dispersed, and the risk environment more complicated, the need for internal auditors to adapt to this new environment becomes imperative. To manage this changing landscape, internal auditors must continuously educate themselves and enhance their skills on new competencies and technologies that are required now and in the future. This is the only way to add value to their organizations and their clients – develop a broad set of skills individually, and collectively, within the internal audit function. This can be accomplished through training and development, but also by diversifying the staffing mix and giving internal auditors hands-on experience in different roles within the organization.
Having a highly competent staff is imperative to the internal audit function because as organizations change, and the role of internal auditor evolves, new skills and competencies are required beyond the traditional accounting-focused skills of the past. Today’s internal auditors need to review business objectives and risks that are increasingly driven by technology, operational change, the use of outsourcing, relentless global competition, demands for higher quality, and an expanding supply chain, among others. Given these dynamics, rotation programs can be very helpful to accelerate the learning process and provide greater opportunities to perform high-quality risk-based audits, while enhancing the career opportunities of internal auditors.
Rotation programs are a career development initiative used to exchange employees' assigned jobs around the organization. Employers practice this technique for many reasons, but in general, they are designed to promote flexibility and to keep employees interested in staying longer with the organization employing them.
There are different types of rotation programs involving internal audit. Some allow non-auditors to rotate in and spend time in the internal audit department and then return to their regularly assigned, or another job, at the completion of their rotation. Internal auditors may also rotate out to another job assignment for a period of time before returning to their audit role.
Another type of rotations are one-of exchanges where a non-auditor works with an audit team for only one assignment.
Benefits and Challenges
These programs present many benefits. They encourage employee learning and make employees more versatile by gaining a broader understanding of the business. This allows them to be better prepared to be promoted to management or to be placed throughout the company. It also enhances motivation because it reduces boredom while increasing knowledge about the company, other jobs, and the possibility of transfers and promotions. It may also result in candidates who want to join the internal audit department permanently at a later date.
Rotation programs can become a training mechanism for future organizational leaders whose work in internal audit exposes them to the concepts, methodologies, and practices of risk management, corporate governance, compliance, and the administrative requirements for effective management. How many manager-leaders are unable to properly manage their programs, processes, and budgets or anticipate control breakdowns?
There are some challenges, however. Having non-auditors perform audits requires having an efficient and effective onboarding and training program supplemented by coaching along with useful and frequent feedback. Although those rotating into internal audit may not have internal audit skills, per se, they often bring extensive business knowledge, are highly motivated, and have high potential so they serve as subject matter experts in other ways while bringing in new perspectives to the audit process.
Success then, depends on having an effective onboarding and training program in place to facilitate the assimilation of those rotating into internal audit. By having a clearly laid-out plan beforehand, new arrivals will follow a logical learning path that defines their role in each assignment, teaches them audit methodologies, and guides them so they apply required documentation standards. Also, judiciously selecting which engagements they will be assigned to work on and with whom is also important.
The Difference Between Transfer and Rotation Programs
Rotation programs differ from traditional transfers, as the individuals are not considered permanent members of the department but are expected instead to be only there temporarily. In general, typical rotation programs have assignment durations from six months to two years.
In some internal audit departments, rotation programs are so ingrained in their staffing structure that there is an expectation of 100 percent turnover within five to eight years. In other organizations, the rotation “out and into the business” is for all auditors except for a core group of managers who are professional or career auditors and are retained to ensure consistency, competence, and preserve institutional knowledge. Retaining a core group of career auditors is a common approach that balances flexibility with departmental continuity.
Preserving Independence and Objectivity
Some individuals express concern that a rotation program will compromise internal audit independence and objectivity. While this could occur, it can be prevented by following the Standards:
“Internal auditors must refrain from assessing specific operations for which they were previously responsible. Objectivity is presumed to be impaired if an internal auditor provides assurance services for an activity for which the internal auditor had responsibility within the previous year.” Standard 1130.A1
“The internal audit activity may provide assurance services where it had previously performed consulting services, provided the nature of the consulting did not impair objectivity and provided individual objectivity is managed when assigning resources to the engagement. Standard 1130.A3
“Internal auditors may provide consulting services relating to operations for which they had previous responsibilities.” Standard 1130.C1
“If internal auditors have potential impairments to independence or objectivity relating to proposed consulting services, disclosure must be made to the engagement client prior to accepting the engagement.” Standard 1130.C2
So, if the rotating individual observes the one-year cooling off period, discloses any conflicts of interest, and only serves as a resource and subject matter expert (SME), the rotation program should work with minimal downsides.
Regardless of the methodology or cycle time adopted, rotation programs should increase the knowledge of internal auditors while providing opportunities for career advancement and preparing qualified individuals to assume manager-leader roles in the future. These individuals will be ambassadors of internal audit and disseminate effective governance, risk management and control practices throughout the organization.
