The Institute of Internal Auditors presents all things internal audit. In this episode, Mike Jacka joins Mike Levy to discuss the importance of soft skills in internal auditing. They explore how emotional intelligence, communication, and relationship building are crucial for auditors to drive change and add value to their organizations. I'm really excited to be here with Mike. Mike and I have known each other for a lot of years.
We've been volunteers with the I a A for it pretty much since I started volunteering. But Mike, welcome. Thank you. Glad to be here. Mike, when did we, when did we first get to know each other? I think it was, uh, probably in the old when it was used to be the publication advisory committee working through Exactly, yeah. Whatever, whatever title it was going by at that time. It's gone through a lot of iterations, but yeah, clear back at, uh, I think we were using Pyrus
and Quill to take the notes. I could be wrong. I think you might be right. I think you might be right. So today, you know, the topic at hand we wanted to talk about with soft skills and internal audit, and I always, I've always find this to be an interesting topic, and you, if you've attended a conference or two over the years, it, it tends to continue to come up. And, you know, as auditors, I think it's a really important one, right?
Because there's all that we spend a lot of time on emerging risks and technical skills, and why knowing what we do and knowing what we're talking about is important. But so much of our success or failure is based on influence and soft skills and emotional intelligence and how we interact and develop those relationships, at least in my opinion, has been a key to success or failure.
And auditors that I've seen be the most successful at what they do are ones that have a high, um, emotional intelligence for EQ and, uh, really strong soft skills, but really curious to get your perspective on it. And, you know, obviously have a conversation with you today about it. Yeah. Well, and I think you nailed it.
It is the important thing. When I first started in auditing, again, back in the age, um, there was an audit manager who once made the comment that she could teach a chimpanzee to audit. Well, for one, that may have spoken about the types of audits we were doing, but really what she was talking about was just that, because so much of, especially back in that day, it was ticking and tying and doing those kind of things.
I was lucky enough that the audit department I started in was doing actually operational auditing before there was a name for it. And that's when I first learned the, the, the value of all the soft skills of communication, of relationship building. I mean, I walked into a unit where relationships were already the number one thing.
So I, it, it, I do not believe you can be a successful audit department, one, unless you have these skills, and two, unless you are develop developing them, It's, um, it's really fascinating because I, you know, as we, and in in what what we do, we, a lot of times we'll do talk about the standards and talk about quality, quality in the internal audit function.
And, you know, as someone that's done a few external quality assessments over the years and looked at audit functions across the board and what's gone well and what doesn't go well, a lot of times I see auditors really focused on staffing development plans and retention, and a focus on making sure you have those technical skill sets on the team and the assessments of whether they, whether they're there.
And sometimes when we see auditors being recruited, they're recruiting strictly for that technical skillset. And, you know, candidly, when I look at organizational culture and how we integrate into organizations, that's, I hate to say it, but sometimes that becomes secondary to the right personality and being a good fit for the organization.
Well, definitely, like one of my, one of my pet peeves, um, and one of the funniest things I see is the, uh, departments that you have to have an accounting degree, you have to have an IT degree, you have to have these certain degrees. So, um, fine and dandy, but then when you talk about what's missing in the department and their survey after survey after survey, it talks about, I need communication skills, I need report writing skills, I need relationship skills.
And yet nobody, what's that in the writeup of how they hire? I mean, it starts right there. You even know what you need. Not to say that anybody, not to say that a monkey can do our job, but people can be taught. I, I had to have an accounting degree to come into auditing when I started back in the early eighties. I probably used it in three audits. And I, I'm not doing hyperbole here, that's probably the truth.
But what I was learning in that time, and part of why I was hired was because of personality. The ability to communicate, the ability to reach out and just be a human being. I think that's what we lose so much in so many audit departments.
And, you know, to your point, you know, that's, I think that's a really, really valid because I don't know, I, I've, I've seen the most successful of auditors over the years, and I would tell you the human aspect and the relational aspect and, you know, it's, it's become much less about what's the finding and what's the report say and the wordsmithing of the report.
And if you really take a step back and what makes internal audit such a value driver within an organization, at least in my opinion, it's so much focused on how do we influence change in the organization. So sometimes, you know, we spend a lot of time, as I mentioned earlier, talking about the standards and emerging risks. But if I really take a step back and think about it holistically, for me it becomes about how do I drive change and how do I improve things?
And you hear topics that sometimes to be very transparent, sometimes frustrate me, because you hear auditors sometimes say, I can't, I can't do that because it's gonna violate independence. And you know, at, at the end of the day, we have a role and a responsibility to remain objective in what we do and spotlight issues.
But that being said, this is sometimes where the soft skills conversation really comes in, because how you have that conversation with your management team, how you talk to your audit committee, how you talk to your board and the relationships you have there really is what drives the influence and, and influences the change.
So if you do it correctly, you know, it gets back to, yeah, what does your report look like and how do you communicate your results before the report and make sure you're bringing people along for the ride. And I don't know, have you seen any of, sorry, that was a long, that was a long-winded diatribe, but have you, have you seen any strategies, you know, how do I, if I'm an internal audit function, how do I bring my team up up in that area?
You know, I, I've always found it to be really hard to train people in relationships and soft skills and interacting with people. But what have you seen as an effective way to do that or bring people and grow them in the organization? One of the more effective things is actually to hire people. We have to come back to that who are inquisitive. Now that seems like, I'm going off on a tangent on this, but honest, I'll try and get it back.
Um, it was always, so I said, if you gimme someone who's creative and innovate, inquisitive, I can make a great auditor out. The point being, first off, as an auditor, you always want to ask that next question, well, what about that? What about that? What about that? But the other is self stock starters who are constantly learning. So it's real easy to throw a bunch of people into a communications class.
It's real easy to throw 'em into a whole session on EQ and developing their emotional intelligence. But unless they're inquisitive enough to want to know that and to want to change and become better, none of that's gonna work. So the, the, the, the classes and the sources out there are really good, but I'll use EQ as the example for me. I, a number of years ago, somebody ran me through EQ and the results, I just, I thought it was really stupid.
I must not have liked the results, which I said something about my eq. But anyway, it wasn't until actually, uh, internal Auditor Magazine asked me to write an article and I told them, Hey, that's just so you know my background. They said, oh, go ahead, give it a shot. And I wrote the article, but in researching the article, that meant I had to start reading and researching it, looking into stuff. And I suddenly went, wow, there is something here.
And I started learning about it and started training other people on it and doing all that type of thing. So that's a, mine is a long-winded way of saying it's almost, yes, you can provide anybody anything, and you can put 'em in front of training and you can give them the opportunities, but they've got to want to be different. They've got to want to find out what the next thing is, how to be different.
I think that's really, you know, going back to your original point about asking questions and making sure that you bring people with inquisitive minds. I mean, you, I know I've mentioned emerging risks a bunch of times, but really when you think about, you know, how do we come to the table when you're dealing with things like AI or cybersecurity?
We don't have, and not every person on the team is a cyber expert, but, you know, one thing we have been trained on, and we do really well, um, every day is ask questions. And to your point, when you bring the right person to the table, it's, they may not need to be an expert in the area, they just need to know how to get to the right question and that line of questioning so it doesn't feel like we're the police, you know, we are strategic advisors to the organization.
In some ways, you know, that advisory services component to where we're talking about the future of internal auditing becomes important. Mm-hmm. And you know, to me, that is a driver in the va in the value, at the value proposition of what we do. And if I take a step back and I look at all the things that are happening in our profession right now, and I look at what the institute is doing, um, you know, the vi the vision report was just released as an example.
And it talks a lot about, you know, this concept of assurance versus advisory. The new standards come out and they're talking more about advisory services. And it, you know, to me, I see a dynamic shift in terms of what the expectations are and what we see as the future of an internal auditor. What's your, what's your take on that? Well, you've hit an important point, and you mentioned another one of my pet peeves earlier, independence and objectivity.
And it's amazing to me how auditors wield that, like a sword to get out of things. It's the easiest way I know to put it. I was doing a training with a group one time, and we were got talking about relationship management, and we literally got talking about league bowling and bowling with, you know, bowling teams within the, your department and within your organization. And this one auditor goes, oh, I don't wanna be on the bowling team. I'll pair my independence and my objectivity.
And the, everybody was looking at them like producers with their mouths hanging open, and luckily the CAE was there. And she went, no, no, because it's not a declaration of independence, it's a mindset of independence and objectivity. That means there's room to be, to do assurance, but there's room to do advisory. And advisory is a huge important piece of it. Lemme tie to something else.
You were talking about, you were talking about, um, AI and, you know, all the emerging things that are going on. Auditors have to be waiting for this and looking for these and finding these things. But my example of that is social media when that was first coming out. And yes, there's, some of us remember was first coming out and my kids came back from Comic-Con a long time ago, and my daughter got to talking about it, and I went, there's something here.
I started reaching, researching it and looking into it, getting into it. And then we wound up being one of the first audit shops that I know of that really did a comprehensive audit of social, social, social studies, social media. And the reason I bring that up is because we started as an audit, we instantly saw it was not gonna work as an audit and made it advisory because there was so much they needed to do. We had that freedom to do it. We had that opportunity to do it.
And it, that's the fun and the joy and the thrill of internal audit. When you go out, you find something and wait, there's here and there's here and there's here, and you just go off. I mean, I'd like to see you do a social social studies audit. Personally, I think that would be, That's a whole, um, outta this presentation. So, so no, so social media auditing to your point, I mean, that, that was a huge, a huge topic that we were talking about.
I actually remember talking to you about it years ago when we were Yeah. Sitting in the committee, sitting in committee meetings together. And I, you know, I, yeah, I don't know.
I just look at our archetype of people and I think, you know, if you look back at where internal auditors came from 20 years ago versus where they're coming from today, we're starting to re you know, thankfully we're starting to see our pipeline shift a little bit in terms of what, you know, what we need in terms of competency from an audit professional.
And I, if you look back at the history of our profession, you know, before both of our times, and you look at what internal audit started, I mean, we've evolved quite a bit over the years. I mean, you know, IA has been around for more than 80 years at this point. And, you know, we, we've evolved quite a bit from a, you know, group that was really checklist driven and number numbered, crunching and, you know, effectively accountants.
And, you know, even to this day we still struggle to shake some of that stereotype. And a lot of us came outta the accounting world to start. But that being said, in the last five or 10 years, and at least in my opinion, um, I've seen a really significant dynamic shift in the makeup and compilation of internal audit teams. But is that, I mean, you've, you've had the opportunity to interact with a lot of different functions over the years. What, what's your take on that?
Are you seeing any kind of seismic shift here? It is changing. I'm always the kind that it's not changing fast enough in my mind, which is another issue entirely. But, and again, I'll draw from my personal experience when I was hiring, because once we got out, I mean literally at Farmer's Insurance, we had to hire people who had accounting and then we quit doing it.
It wasn't required. I started hiring people from the sales department, people from the underwriting department, from the claims department, and you could see how an insurance company, my gosh, these people knew where the skeletons were married, if nothing else. I hired a communications major with the idea of, of, first off, she was talented, but with the idea of improving the communication within department, improving the writing, improving all those things.
So that expansion of what you are allowed to do and allowing yourself to hire is hugely important. I have seen pe, I have seen organizations be successful that way by expanding and going beyond. I've seen all, I've also seen ones stagnating because they cannot get outta that mindset. Again, like I said, you have to hire an accountant. Wait a minute, accounting isn't even what you need. You need these soft skills and you don't even have questions in your interviews, then ask that.
But it's important. You, you've gotta expand it. And I realize that all depends on the size of the organization. Farmer's Insurance was a big organization, we could do it. I've got a good friend, he is the audit department. Luckily, I think there's three or four people in his head, so, you know, he's able to to talk it over with himself. But you know, that that's the issue that goes on here. And that's the change that is evolving.
As I say, my biggest thing is I, I, I constantly feel like we're still trying to pull ourselves up by our own bootstraps that we're just not, not there yet. And I'll use something else as an example. How long have we heard we're gonna start using tools? We're gonna start using computer tools, we're gonna start using cats, we're gonna start using data analytics. And it's been a constant litany that's gone on and on and on, and we never get to it.
And I have that same fear about AI and about bots and about the tools that are out there currently that we're gonna constantly say, yeah, we're gonna get to that tomorrow. Yeah, I mean, well, well said. And I mean, one, one comment, and I I wanna dig in a little bit more on the technology and AI and AI side, but you know, to your point on the teams, you know, I don't, I, I'm seeing a really diverse thing happening.
And what I mean by that is some teams are still very financially focused and driven, but I'm seeing some cult some shifts in dynamics in the international space where, for example, you know, I was working with a large hospitality provider and they do a lot of construction projects, and what we saw was they started shifting their hiring to more engineering graduates, um, that understood the construction aspect of it. They weren't auditors, but they taught them how to audit, right.
And what was nice about that, going back to the communication skills and the interactions, is they had a, they had sort of that, you know, it's another form of soft skills, but they could kind of come in and talk the talk from an engineering perspective. So they had more immediate respect by the folks that they were charged with auditing.
And you know, more recently in the US it was a, you know, public sector group that was hiring a lot of public policy folks in their internal audit function because those people understood and came from the same industry and area and they could really understand it. And, you know, to your point, just to put a cap on it, I, I really do believe hiring people that know how to ask the right questions at the right
time goes a long way. And I wanna, uh, go down a real quick road where sidetracking like crazy. But you look at leadership skills that are wanted just anywhere in any organization, any leaders, exactly what we're looking for, internal auditors. So the point is we're not teaching them anything different with internal audit. We're just teaching them to be leaders and to use their brains to critically think. And that's what leaders do. We're developing the leaders of the future.
Hundred percent. Um, talking about technology, 'cause you mentioned that, and I agree with you, you've heard about, we've talked about cats and analytics and whether RPA, you know, and, and the RPA is still very relevant and being used, but I mean, we're, we're talking, we've talked about a lot of different technology things over the years. Cyber continues to be a top risk, you know, and we keep focusing on it, but I really wanna talk a little bit more about generative ai specifically.
AI's been around for years, but generative AI specifically, when we think about the last podcast I was part of, we talked about, um, how quickly it's risen through the ranks and how much the adoption, how quickly the adoption is happening. Um, we're spending a lot of time as an institute and as a profession, and, you know, I get a lot of questions about this, um, on a weekly basis, really around how do we better adopt AI within internal audit.
One risk that I see with internal auditors adopting AI that I'd love to talk a little bit about is we already had a bit of a challenge with auditors and their development of relationships. And what I mean by that is, you know, one of my pet peeves, um, and you've talked about it abstractly earlier, is I don't like auditing by email.
I'm a big proponent of getting in front of someone and having a, having a conversation because, you know, the proverbial water cooler talk doesn't happen over email and you don't really get the same ability to develop relationships.
So that's always when I'm working with or, or auditors earlier in their career when I see it happening, where you have auditors that are just sending emails all day and never getting in front of their customers effectively that they're, that they're trying to work with. I struggle with that. And my concern with ai, um, I think AI is a huge value creator within the world, frankly, but within the internal audit function, I think it can be used extensively.
But I, I worry that if we let it just sort of write our emails for us and we blindly rely on it, what does that do to soft skills and our ability to interact with our, with our stakeholders within organizations? Because, you know, again, is it really our voice anymore? And how are we developing relationships? If it's just, you know, AI talking to AI at the end of the day, what does that, what is, what do you, what do you see as risks there or your thoughts in general?
First, be careful when you talk about that working from home. I did a blog post that said that internal auditors shouldn't be working from home at all. And I've got the most responses of any one I wrote, most of them negative. Um, it's interesting, I had these conversations. I, you know, you try and raise your kids, right? What happens? My son became an internal auditor. But, um, you know, I had the conversations with him because he is of a generation that does more of this.
First off, I I, well, lemme go back to another story, and this goes way back. I was using Lotus 1, 2 3, which people don't know what that is to do database programs for our auditors to use. And what we found was the more they used it, the less they understood the analysis it was doing. So this leads all the way to your point. The more you're letting generative AI do things, are you losing the ability to understand it? If you have, let's go this way, it writes a report for you.
How do you know what's wrong? And right about the report if you haven't gone through the process yourself as always, that you understand what works. Now that there are sections I sincerely believe can be done, just, you know, throw in and put it in, but you've gotta know what they are and have to understand them. So I think that is, um, there's a lot of different challenges in there. And, and the number one is how we've talked about this for soft skills.
There is a human element to being a good internal auditor. Covid taught us that was a certain amount of human element we might be able to pull back from personally feel we pulled too far. But that's just me. I'm mold, I have white hair and you know, and the pearl gates are not too far away anyway, but does generative AI even pull us farther away? And so every time we rely on it, are we able to get our own voice in it? Are we able to communicate with the people?
Um, I had a, uh, a boss who, he got sick of emails and he had a great line, and I think it applies to this one, pick up the damn phone. You know, and so in this situation as there's more of these things being written, you know, why do you write an email? Can you just, okay, you can't be in person with 'em, but you can talk to him on the phone and heaven forbid you have to set up a meeting, but do it that way if you have to.
So, um, you know, every change in technology has, its, causes us to fundamentally change our understanding of the work we do. You know, computers, you know, we were the first department to have a laptop at Farmer's Insurance. Imagine what that did. But it did have to change what we did. And the first thing, I think this story is relevant, but when we first got laptops and we were gonna use them in the field, and they said, oh good, are you gonna be able to get more work done?
It frees up your time to do more valuable work. And some of that valuable work is just flat out talking to people. I honestly believe that to be arguably the most important thing that we do. To your point, I mean, I, you know, again, his, just to reiterate what I had said earlier, when we take a step back and we really think about our value proposition to an organization, it's how do we drive and influence change to enhance and protect organizational value?
And I would tell you just even in our, in my my organization now, I mean, we, our team is extensively using generative ai, but we're using it in a intelligent way. And that's the biggest risk I think we have with our auditors earlier in their career. And the use of it, I think people are gonna use it whether you like it or not, whether it's mm-hmm. Allowed or not within an organization. But I can use, uh, a chat GPT or Bard or co-pilot type tool and look at a response.
And because I have years of experience, I know whether that response is right or wrong and I know how to craft it in my voice. Mm-hmm. Whether I talk to it or email it. I think a risk is someone earlier in their career is just gonna take it, copy and paste it into an email, and then that becomes their voice. And then mm-hmm. When, if I'm a CAE thinking about reputation, branding interaction within the function, I think that's something that needs to be monitored really closely.
Um, to your point There, raise some interesting questions about that I, I have no answers to. And I think we suddenly have to learn how is it we learn what our voice is, you know, we walk into a job and we develop that voice. Now, what is the role of generative AI in developing voice? That's a great point. I mean, I think our, I mean, my personal opinion on that is I think our voice is developed based on many different inputs, right?
I mean, everybody you interact with on a daily basis contributes to what your voice ultimately, whether you know it, whether it's consciously or unconsciously, I think that contributes to your voice.
So, I mean, to your point, it could really just be something that we harness that becomes another part of our voice and another resource and input that that has as long as, again, as long as it's used practically and with the right mindset and lens to it at the end of the day, um, I get, I, I'm actually, I mean, to your point, overall, I'm quite excited about it and what I think it will do to our profession and is doing to our profession, because even beyond the more UI driven, you know,
chat GPTs and co-pilots where you ask it a question and it gives you an answer mm-hmm. We're seeing integrations happening relatively deeply across the technology stack within organizations and within the tools that we as auditors are using. So there's a lot of trepidation and people are nervous and saying, is this another buzzword? You know, and things like that. But realistically, you know, I really think it's gonna drive positive impacts across this area for, for auditors.
That's my personal opinion. I just think we need to understand it and manage the risk as auditors and leaders, um, within organizations. And lemme throw in one more thing, and actually, uh, Brian Richards and I did a, an article about this in Internal Auditor Magazine. Our work is gonna change. First off, if our work doesn't change, we may as well just be thrown out with buggy whips.
Okay? We have to constantly change, but because our work is going to change, we have to understand AI well enough that we understand its role in supporting us, not being us, but supporting us. And for some people, it'll be one thing for leaders, it'll be another for people who have a real niche skill, it'll be something else.
Um, and there's a whole in depth thing that goes on about this, but it is something that you don't have to be in depth to go, wait a minute, if I want to move forward, I have to learn about this and understand it and understand, one, what it's gonna do to the job I'm doing, and two, what do I wanna know about it to take me into the future? I, I agree. So, so Mike, we're starting to run low on time.
Um, not to put you on the spot here, but one, you know, one question I have, you know, so if you're a chief audit executive sitting here today in 20 24, 20 25, thinking about top risks, thinking about your audit plan, risk assessment, resource constraints, and you're sitting here listening to this podcast, what are, what are the top three things that you'd, you'd have them take away that they can implement within their teams to help improve, you know, relationship development, soft skills,
emotional intelligence across the team? Obviously recruiting the right people is a critical part. Yeah. But how do I help instill that within my team? Um, First off, I thought you were gonna ask me for the top risks for 2025, and ever since Covid, I don't worry about coming risks, who knows? Come on. Um, you know, one thing that I could see every audit department probably needs to reevaluate is one, what is your strategy? Okay. Do you have a strategy and do you have a strategy for hiring?
Do you have a strategy that includes what those skill sets are you want from those people? And then is that incorporated in your hiring or do you just hire warm bodies? So I think the whole strategy about, I mean the, the audit strategy has to match the strategy that's going together with the people you are hiring and making sure there is an alignment. That strategy obviously fits in with everything we've talked about here.
Emotional intelligence, uh, with community, all soft skills, um, that I would say is the big one. The other big risk I would see is making sure that your department is keeping up with whatever the technology is. You know, we talked a little about our, we, we threw RPA out there and I threw bots out there, and that's still important. That's still a piece of it, but, you know, what's the next thing catching up and then kind of keeping an eye out.
May, you may have one person on your team who, you know, your job right now is to look even farther ahead and see what the next thing we have to worry about is, you know, something on beyond ai. I mean, that's only two of them, but that's two of the real big ones. I think that really tie into it what a CAE does about their own department and making sure their own people are ready. That's the best way to put it.
Ready and effective because you talk about something, and I love it, the idea of being change, and we used to use the phrase change agents all the time. I love that phrase. That's the best way we can drive value. Yeah. And I mean, I agree with everything you said completely.
I, the th the thing, the third thing I would layer on is just if you have people that don't get out of their chairs and talk to people and develop relationships, I've seen auditors shy away from some of that because of the terms of independence and objectivity. Mm-hmm. I encourage your teams to get out of their seats. Yeah. I mean, that to me, that is the most important thing you can do and it helps drive a lot of other organizational benefits.
Yeah. But again, to reiterate, and you know what we talked about when we, we just did that whole vision study, right? So Vision 2035 was released, and we as auditors have to continue to improve our soft skills and our, and our, our opport. And there's a huge opportunity there for us to continue to drive more value if we can continue to drive relationships within the organization. Our whole responsibility and role is really to influence change and drive spot and spotlight issues.
And we're far more effective at that if we ultimately have those relationships and have strong soft skills and emotional intelligence. One more thing I wanna throw in real quick, because so often it feels like we're talking to the CAEs in the AVPs. I'm sorry if you are, you are sitting at the lower levels, this is just as valuable for you. Maybe your CAE isn't doing this. Your A VP isn't doing this, your director isn't doing this one.
That doesn't stop you from developing and it doesn't stop you from challenging, to be honest with you. If you're in a department where when you challenge, you're constantly beat down, um, there's a thing called a resume you might brush up on a, find a department worth working for, And you know what, AI can probably help you write that at the end. Yeah. Well, well Mike, thank you very much for joining us today.
It's been a pleasure and you know, look, looking forward to seeing you at the next conference, and we'll catch up soon. And thanks for your time. Thank you so much for having me. If you like this podcast, please subscribe and rate us. You can subscribe wherever you get your podcast. You can also catch other episodes on YouTube or@theiia.org. That's THEI a.org.