The-Accountant-July-Aug-2018

BUSINESS AND PRACTICE DEVELOPMENT
of products and services, including its
technology and processes. Also challenging
is the fact that in an M&A environment,
senior leadership is likely to focus on the
financial and operational aspects of the
process, 3 whereas the role and integration
of internal audit may not be considered a
high priority.
Successfully integrating internal
audit departments begins with a firm
understanding of the strategic goals of the
company and the internal audit function,
as well as an understanding of the cultural
differences between the two groups that
are coming together. Keeping a big-picture
goal in mind makes managing the tactical
aspects of integrating new staff much
easier.
Strategy
Before making decisions about personnel
or how to organize a department, it is
necessary to have a clear understanding
of the internal audit function’s strategy.
This ensures that all decisions support
that strategy and are aligned with it.
That sounds intuitive, but it is not always
clear how that concept translates to
action. While processes such as updating
organizational charts, updating the audit
charter and reviewing past audits of the
newly acquired business are important
tasks, understanding the role and
objectives of the new, merged internal
audit group is not something that can
be done by taking a passive approach. It
requires talking to the senior leaders who
are defining success criteria for the merger
itself and understanding what types of risk
could have an impact on success.
During a merger, a great deal of thought is
given to the company’s long-term strategy.
Internal audit leadership must not be timid
or subtle about asking questions such as:
• Where is the company going?
• Where does senior leadership see
internal audit fitting into the
big picture?
• How does leadership define success
for the internal audit function
after the merger?
Down the road, the departmental leader
Before making
decisions about
personnel or how
to organize a
department, it is
necessary to have a
clear understanding
of the internal audit
function’s strategy.
This ensures that all
decisions support
that strategy and
are aligned with it.
will have to make some difficult decisions,
and these strategic conversations with
senior leaders will be the basis for having
confidence in those decisions.
Culture
In addition to understanding the
department strategically, it is also
important to “define the target culture.”4
A department must consider, for example:
• Does it prefer a more horizontal or
vertical leadership structure?
• Does it tend to specialize or work
across disciplines/specialties?
• How does it track progress,
communicate issues and interact with
stakeholders?
• How does it establish its
independence?
• Does it focus on compliance only, or
does it serve in an advisory role as
well?
• To what standards does it audit?
• Is it global or domestic? Small,
medium or large?
If this line of questioning points to
significant differences in structures and
styles between the merging groups, the
differences cannot be expected to resolve
themselves. Instead, this analysis should
form the basis for creating understanding
and agreement about how things will be
done going forward. Otherwise, these
contrasts are certain to cause difficulties.
Indeed, according to a survey of executives
who have managed through mergers,
failure to successfully reconcile cultural
differences was the number-one reason
for a deal’s failure to achieve the promised
value.5
JULY - AUGUST 2018
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