Did you know that most audit shops worldwide are small, typically consisting of 1 to 5 FTEs? This reality shapes the landscape of internal audit departments globally, highlighting an important truth about our profession: size doesn’t determine effectiveness.
I started my journey 22 years ago as a two-person audit team and grew it to 46+ FTEs. This growth story isn’t just about numbers; it’s a testament to the potential that lies within small audit teams when they focus on strategic value creation.
The Power of Strategic Alignment
Along the way, I’ve encountered many lessons, but one of the most impactful audit engagements I led demonstrated the real power of aligning audit risks with business strategy.
We were auditing the business risk register, which was derived from the company’s strategy, objectives, and five-year plan.
This engagement stood out because:
- Strategic Alignment: Audit risks directly tied to organizational strategy and objectives make findings highly relevant to senior management and the board. This approach ensures that even small audit teams can deliver insights that resonate at the highest levels of organization.
- Focus on High-Impact Risks: Instead of traditional cycles on areas like accounts payable or fixed assets, we concentrated on the most significant business risks. This targeted approach maximizes the impact of limited resources.
- Enhancing Risk Management: The audit identified that some risks were not properly rated or assessed, leading to meaningful improvements. This discovery process helped strengthen the organization’s overall risk management framework.
The Power of Backtesting
One of the most valuable techniques we used was backtesting. This methodical approach to risk assessment proves invaluable in real-world scenarios.
After an incident occurred, we revisited the risk register to assess whether the risk had been identified and rated correctly – and why the event still happened.
A Real-World Example in Action
In one operation, the risk register identified that a barge failure—used to transport trucks across a river—would cause a major supply chain disruption.
The bridge couldn’t support the trucks’ weight, making the barge a single point of failure.
Our audit confirmed the severity of this risk and worked with management to implement an action plan: 𝙞𝙣𝙫𝙚𝙨𝙩 𝙞𝙣 𝙖 𝙨𝙚𝙘𝙤𝙣𝙙 𝙗𝙖𝙧𝙜𝙚 𝙖𝙨 𝙖 𝙗𝙖𝙘𝙠𝙪𝙥.
Five months later, just before Christmas, the barge broke down.
🚨 The second barge hadn’t been purchased yet.
🚨 The business faced a major supply chain interruption.
Practical Tools versus Theoretical Models
This real-world case underscores the practical value of risk registers—often criticized in academic discussions in favor of theoretical models that don’t always translate into reality.
In practice, tools like risk registers and heat maps can provide immense value—when used effectively.
My takeaway is this: use the tools at your disposal, test them in real-world scenarios, and refine them based on what works—not just on theory. This practical approach ensures that even small audit teams can deliver substantial value to their organizations.
The effectiveness of an audit team isn’t measured by its size but by its ability to identify, assess, and help mitigate risks that matter to the business. By focusing on strategic alignment and practical risk management tools, even the smallest audit teams can make a significant impact.