Behavioral change for a strong control environment

It’s a tough landscape: a challenging economy, competitive pressures and increased regulation. Managers are expected to meet targets and keep costs low. The C-suite is under scrutiny from investors, regulators and the media. In the face of corporate scandals, such as frauds, unexpected losses, inappropriate revenue recognition practices, safety failures and more, companies are consistently striving to prove they are operating responsibly.

Internal audit departments are at the forefront of this drive to demonstrate compliance.

When it comes to motivating employees, most organizations confronted with emotions tend to neglect the natural cycle of change.

They provide independent reassurance that day-to-day operations are running in accordance with established processes and protocols. But there is an aspect of their role that is relatively new and that many internal audit teams are struggling to address: cultural and behavioral auditing.

This is the reason why EY recently brought together a number of heads of internal audit to discuss how cultural and behavioral auditing can be successfully integrated into an organization’s audit methodology. This article highlights the issues discussed at that meeting and provides practical solutions to the challenges faced.

Cultural and behavioral auditing provides insight into environmental triggers and underlying motivators, and consequently helps to provide insight into what factors drive behaviors and, therefore, how your people will respond.

By incorporating cultural and behavioral auditing into your internal audit methodology, it provides:

  • A means by which you can articulate what’s happening in the business
  • An understanding of current performance that allows you to prioritize better the steps to effect positive change
  • Outputs that can be used across the business, not just in the areas that have been audited

How can audit departments successfully integrate cultural and behavioral aspects into their reporting? To address this question, EY has developed BEAM, a methodology that helps organizations identify and understand variances in performance. The model allows companies to analyze cultural and behavioral issues, thereby providing fresh insight into how to diagnose performance problems. It also offers a practical approach for the delivery of recommendations and improvement areas.

Read the article for an overview and understanding of the BEAM approach and insights into how to report on intangible issues.

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