Audit and assurance are under the spotlight. Corporate failures – Carillion, BHS and Patisserie Valerie to name a few – have forced directors to focus on the credibility of internal, as well as external, assurance activities. In the external audit market the BEIS consultation on Restoring Trust in Audit and Corporate Governance has focussed attention on the critical attributes that underpin trust.

January 2020 saw the release of the Internal Audit Code of Practice, building on existing guidance for financial services, with a focus on improving value and increasing effectiveness. It requires the Chief Audit Executive (CAE) to be directly employed by the company, even where the Internal Audit function is largely outsourced, to ensure they have sufficient and timely access to key management information and decisions. It emphasises the need for the CAE to have experience and seniority equivalent to the executive, and reinforces the independence of the CAE through their direct reporting to the Chair of the Audit Committee, with engagement and oversight internally through the CEO.

During the consultation for the Code, much of the discussion centred on how this could be achieved proportionately for all organisations, large and small. Whilst larger and more heavily regulated companies will need to ensure budgets for internal audit are sufficient to attract and deploy CAEs with the credibility to operate at an equivalent level to the executive (or external audit partners), this is not always reflective of the risk profile for all companies, or feasible in a talent pool that is growing, but still relatively small.

If we accept that we need CAEs to bring real credibility and experience, and we want to avoid split loyalties with individuals directly accountable to the company and directors they are employed by, we need to consider new solutions.

The pandemic has perhaps presented us with a view as to where the solution may lie. Can we embrace the possibilities that flexible working approaches present? Could we imagine a scenario where it is no longer always necessary for a CAE to be office based and working full time?

Technology allows us to do things differently. The traditional CAE role can be broken down so that the true strategic thinking and leadership is provided with credible experience, whilst the day-to-day operational management is delegated further. There are a few financial services companies already working this way.

We know the role of a CAE is demanding, requiring significant resilience, particularly when the business is under pressure. CAEs have to ask the really difficult questions and will often not be thanked for it. Over time many seek a more flexible working pattern, potentially looking to reduce their hours. They want to use their experience and continue to have a voice, but to do this in a way that enables balance and a blended portfolio. There is also the possibility of combining such roles with a non-conflicting NED portfolio, enabling the sharing of learning and experience.

There is a clear opportunity. Can we bring together the need for greater seniority and experience of CAEs, with the potential supply of credible individuals in a flexible manner? In doing so can we stretch budgets further without undermining, and indeed whilst improving quality and objectivity, and in doing so create a more inclusive and diverse working environment? Maybe in doing so we can also contribute to a more exciting and diverse career path for those we want to encourage into the profession. We believe that now is the time for a more innovative discussion.