How to Listen to Great Music by Robert Greenberg (Part 2)

Classical Era Orchestral Genres, Part 2. The solo concerto was born. This was very important in classical music. The piano and violin as solo instruments were very popular. The viola is any stringed instrumented played a with a bow. Later, it was mostly played on the upper arm or shoulder. There are 4 principal instruments (soprano, alto, tenor, bass). They correspond to the violin, viola, cello and bass. The viola is a perfect fifth below the violin. Modern violins have chin rests. The instruments made by Amati, Stradivari are simply of top grade. These were Baroque instruments. Their instruments could endure the test of time. Fortepiano refers to early pianos made with wooden harps. The first drawings of a piano was invented by Cristofori in 1700. Pianoforte means soft-loud By 1800, pianos almost completely replaced the harpsichord. Mozart composed more than 40 concertos and was incredibly prolific. One simply cannot go wrong with Mozart. Sometimes, there will be a solo theme exclusively for the soloist. The soloist, most of the time, would also prepare a cadenza or a solo. Listen to mozart’s piano concerto no. 1. Mozart’s piano concertos are one of the most famous and best ever composed.

Send in the Buffone. Opera in the Classical Era. It is late 17th century Baroque Italian opera now. The Metastasio was composed between 1698 to 1782. It was known as opera seria, or serious opera. Rosseau hated opera serias and the aristocracy of Italy. His ideas were controversial. Opera Buffa was invented in the streets. Rosseau embraced this style of opera. Listen to Giovanni Battista Pergolesi, La Serva Padrona. Listen to Mozart’s operatic ensemble. Mozart composed over 22 complete and incomplete operas. One famous one is the Magic Flue in 1791. Don Giovanni was composed in 1787. It is Italian for Don Juan. Beethoven emerged just after Mozart passed away at 35.

A Revolutionary Artist for a Revolutionary Time – Ludwig van Beethoven. Was Beethoven an 18th or 19th century man? He changed the face of Western music. Listen to Haydn’s symphony no.88 and Beethoven’s Symphony 5. Hadyn was more upbeat. Beethoven’s is ferocious and modern and dark in character. Beethoven’s is in C minor. Beethoven’s theme cannot be sung. The phrases in Hadyn’s theme are rhymed. Beethoven’s symphony 5 doesn’t sound like other music in the classical era, but sounds completely modern. What did Beethoven take his music in this direction? Beethoven was a lonely child and did not have a social life. Bach’s music had more influence on Beethoven than Mozart. After his mum passed away, he took responsibility of taking care for the family. Beethoven focused on power, sound. He was a cocky character, who learnt from Hadyn. After he lied to Hadyn, Hadyn stopped teaching him. Beethoven was very strong willed, which made it difficult to teach him. His hearing loss began in 1796 and he was deaf in 1818. However, despite all that, he still continued composing and making a difference.

Beethoven’s Compositional Innovations. When the going gets tough, the tough innovate. He was influenced by Napoleon. From 1792 to 1802, he composed mostly classical style of Hadyn and Mozart. The heroic period is between 1803 and 1815. Many of the string quartets and piano concertos were composed during this period. The late period is from 1816 to 1829. They contain the last 5 piano sonatas, the 9th symphony and the diabelli variations. He composed 9 symphonies, 16 string quartets and 32 piano sonatas. He believed that music is a form of self-expression. He simply uses classical form to where they serve his expressive needs. There are also motivic development and on-going dramatic narrative. He placed great emphasis on learning and development as an artist. Many other composers were influenced by his works. All of his innovations can be heard in the first movement of Symphony 5. The music grows from violent to lyric triumph. Theme 2 was in E-flat. Theme 2 follows on smoothly from theme 1. Now, we enter the development section. Motivic development and fragmentation have deep metaphorical meaning. Later he switches to C major. C major is the key of hope and life. Essentially, he was a Romantic composer.

My art is for me, not for you. What I feel, see, and hear is important, and I/my art will express what I feel, what I see, what I hear. Take it or leave it. – Robert Greenberg

It is the struggle between C minor and C major, between despair and hope, between death and life, that is the large-scale dramatic narrative in Beethoven’s 5th symphony. It is a struggle that is won by C major during the third movement, a victory that is celebrated in the blaring and giddy 4th movement. – Robert Greenberg

Isn’t it Romantic? The Music of the 19th Century. This is the period from 1827 to 1900. It meant a poem that dealt with legendary people. In the 19th century, it refers to something outside of the everyday. There is much expanded expressive content and incremental changes. Franz Liszt was from the Romantic era. Many respected Beethoven as the ‘Moses’ of new music. There are 4 romantic era trends. They are fascination with emotional states. Tchaikovsky wrote the fantasy overture to Romeo and Juliet in 1869. This represents explicit emotion. The second major era is musical nationalism or use of folk music. The third era was a fascination with nature. Nature was pure and was worshipped. Beethoven’s Symphony 6 represents a summer evening’s storm. It is known as the Pastoral symphony and has a 4th movement climax. There was an even greater shift to individual styles.

All art aspires to the condition of music. – Robert Greenberg

Structural Problems: Formal Challenges in early Romantic Music. Alternative structures needed to be formed. People started composing shorter pieces and without structure. Program music flourished in the 19th century. Richard Strauss’ Don Quixote is about Don Quixote in 10 episodes. A symphonic overture is a 1 movement program written in sonata form. Schumman, Mendelsson, Mahler, Dvorak all composed a few pieces based on traditional structures. Brahms was flexible, like Beethoven. Schubert created the ballad or a lieder, or a song. He composed the Erlkonig (Elf King) for Baritone and Piano. Schubert was incredibly prolific for someone who passed away at 30. He composed 9 symphonies, 13 operas and hundreds of songs. The piece is from a poem. A father attempts, vainly, to save his young son from the clutches of the ‘Elf King’. This is one person mini opera. The father is in baritone. The voice of the boy is set high. The narrator is set medium low and the Elf King is smooth. This is one of the compact, power of the German song. Schubert went from one piece to another. Both Chopin and Liszt continue to define piano music up to today. Chopin was born in 1810. He was composer for piano. He composed 16 polonaises, 4 impromptus, 21 nocturnes, 20 waltzes, 4 scherzos, 58 mazurkas, 27 etudes, 28 preludes. Chopin has unwavering commitment to the piano. His pieces are also very short.

Going Beyond Beethoven. Franz Liszt said that his talent ennobles me. He believed God bestowed him with a gift. Many composers were influenced by Beethoven. They wrote program music. Listen to Hector Berlioz’s Symphony Fantastique, composed in 1830. He took creative risks. He was a self-indulgent man. He composed it when he was only 27. However, it’s his most bold and influential work. It was his symphonic autobiography. It was one of the most ground-breaking works. It was a story about an artist in love. His passion for Harriet Smithson took centre stage. It was a combination about music and literature. The piece was 5 movement long. The first movement is about reveries – passion. The second is that he finds her noble and shy, yet the image is linked with a musical idea. It hardly resembles the sonata form anymore. The second movement, the image of his beloved appears wherever he goes. The third movement is dark, one of despair. He hopes that his loneliness will be over. Nature is the metaphor in this case. There is a weeping descent too. In the 4th movement, he poisons himself with opium. The ‘March of the Scaffold’ is one of the most famous movement. The author was accused of killing his beloved and his severed head was displayed to the howling mob. The fifth movement is about hallucination. ‘She’ joins the Sabbath and takes part in devilish orgy. This piece of music is stunning in how original it was.

19th Century Italian Opera – Rossini and Bel Canto. The focus is on French and Russian opera. They were very influential in the 19th century. Operas were being performed in many places. It was cultivated in the large Italian cities. Opera was supposed to delight and move the listener. The operatic style is bel canto or ‘beautiful voice’. Rossini, Bellini were some of the composers. Rossini composed William Tell, an opera. He is one of the most quotable composers of all time. Most of the time, operas were not published and they passed off old material as new. Rossini used the same overture in 4 different operas. The Barber of Seville, was however, very famous indeed. It is one of the greatest opera buffe ever composed.

Giuseppe Verdi – It’s All About the People (Dramatic Truth in Italian Opera). His name sounds European. He was no nonsense and to the point. Italian opera improved because of him. He was a prolific composer too. His wife and daughter passed away. Un Giorno di Regno was a complete failure. Nabucco was a hit. He used dramatic truth and momentum. Often he kept to his style and refused to bow down. He didn’t care what the critics thought of him. The orchestra played a much bigger role here. Aida was his most famous opera. The characters he chose resonated greatly with the audience. A lot was based on how human the characters were portrayed.

Nineteenth – Century German Opera (Von Weber and Wagner). This was about nationalism and experimentation. In 1821, Carl Maria von Weber’s Der Freischutz was played. German opera was not prominent. The Italian ones always reigned supreme. The singspiel type became very popular and gained huge prominence. Johann Wolfgang von Goethe was outstanding and was able to capture the literary beauty of the German language. Music was tended to be dominated by minor keys. The opera tends to contain supernatural beings and happenings and a background of nature. The pattern of good over evil tend to be present. Carl Maria von Weber was a virtuoso pianist. He wanted a fully inclusive artwork. German opera was a lot more free form than Italian language ones. Richard Wagner was a controversial composer and was a revolutionary. He created over 13 musical-dramatic productions. He wanted to combine Greek drama, myth, Shakespeare and Beethoven together into an art form. Tristan und Isolde is a very influential piece. Wagner invented the Leitmotif, a thematic melody or progression that represents a person, a thing, or even an idea. A descending chromatic line represents death. Arthur Schopenhauer believed in the power of classical music. This idea helped shaped Wagner’s thinking. It cannot be denied that Wagner was revolutionary and created an alternative reality and arouses a sense of the mystical in us.

Of Thee I Sing (Music al Nationalism in the 19th century). The evolutions faltered. Political nationalism was outlawed. This led to a musical movement called nationalism. This was a powerful feeling. The basis here is largely folk music. We will explore the music of Chopin, Liszt, Brahms and the group of composers known as the Russian Five. Chopin loved Poland and some of his works are styled like Polish dances. Listen to Polonaise for Piano in A Major. It is like a waltz. This one is the most heroic. There is a simple form A-B-A. Later, he saw his income dry up as he got older. He hated performing. Liszt was an amazing piano prodigy. He was impressed by how Paganini played the violin and wanted to be the Paganini of piano. His works are very difficult to play. Many saw him as the God of piano and women were extremely impressed with him. He was virtually one of the greatest who ever lived. Later on, he composed orchestral music as well. Hungarian Rhapsodies were Hungarian folk music. The Rhapsodies are very fun. He was proud of his music. The most famous piece is Hungarian Rhapsody the 2nd in C sharp minor. It was played in Tom and Jerry too. There are constant shifts between major and minor. Nowadays, musicians could play part of their ‘ethnicism’ too. Brahms was very impressive too. He composed Hungarian dances and other works. Listen to Brahm’s Hungarian Dance 5.

Romantic Nationalism, Russian Style. Russian nationalism also emerged because of political events. St Petersburg is the most westernized city in Russia. After Napoleon’s defeat in 1812, pride swelled. One of the famous composers in Mikhail Ivanovich Glindka. Later, he composed an opera. The Russian 5 were Cesar Cui, Modest Mussorgsky, Nikolai Rimsky-Korsakov, Alexander Borodin, Balakirev, Glindka. They studied music carefully and analyzed them. They didn’t like Rubinstein as they were a threat to Russian music. Listen to Nikolai Rimsky Korsakov. He mastered proper compositional technique. He became very influential. Listen to the Russian Easter Overture. It is very nationalistic. This was the spirit of romanticism. Next we will explore the different factors that affected 21st century music.

A Modern Music for a Modern World. This is a period for change. Music changed dramatically. For those who liked classical music, 20th century music might seem dissonant. They are acquired tastes. However, we might feel so because people need to get used to the music. You will need to understand the context of the music and the historical perspective. The period of Beethoven was known as romanticism. Mahler’s symphony 9 is still a Romantic composition. Mahler was a complex and difficult man. He was almost homeless and never welcomed anywhere. He was ‘forced’ to conduct for a living. The first movement is pregnant with meaning. The cello notes represent his heartbeat as he was suffering from irregular heartbeats. Later, the music slips and spirals into the abyss. It is a fatal heart attack. Commercially recorded music was only available in the early 1900s. It has been a double edged sword. The speed at which we do things now will probably lead to over-stimulation in someone from the 19th century. Because people demanded more, we cannot simply play the same old music over and over again like in the past. This affected music creation. Einstein’s theory of relativity forced us to re-consider the way we live. There was an extremely great desire to be relevant.

I want my music to be as relevant to the 20th century as the aeroplane. – Claude Debussy

‘Commercial recording made it possible for anyone to hear anything, anywhere. But, unfortunately, the record industry also created the passive listener: the couch potato. With the availability of commercial recordings, it was no longer necessary to attend a concert or learn how to play an instrument yourself if you wanted to hear music. – Robert Greenberg

Two hundred years ago, people thought nothing of sitting in a carriage for 5 days to travel 250 miles; of taking 30 days to cross the Atlantic; of writing a letter and having it answered months later; of reading a 2000 page novel.- Robert Greenberg

Revolutions, Evolutions, and ‘-isms’ galore. Making New Music in the Early 20th century. The French music revolution was emerging. France is the musical marsupial of Europe. Their music tend to celebrate timbral nuances. The French language is nuanced and flexible. This is a sense of pride for the French. Claude Debussy was revolutionary. His music was characterized by finesse and nuance. He was born in Paris and hated German music. Debussy liked to eat only small portions of food. Some of his works were influenced by the French language and romantic expression/literature and Impressionism. Impressionism was about art, light, blurred edges etc. He had an original approach to rhythm, melody. Listen to ‘Nuages’ from Three Nocturenes for Orchestra. His music doesn’t have any clear theme. His style has been greatly imitated. He sees every chamber group as individual instruments that can be used in any way he pleases. The harmonic colours are often interwined. His music was not well received by critics. Often, his music contained a lot of vague floating shapes and this was not well received by many. Debussy’s music is what modern compositional music sounds like.

From Russia with Rhythm – Igor Stravinsky, Stravinsky’s teacher was Nikolai Rimsky-Korsakov. He was a late bloomer and was not very talented when young RK accepted him as a student. Serge Diaghilev spotted Stravinsky’s talent. Stravinsky’s first great work was The Firebird. It was based on a Russian folk tale. There was plenty of innovation being used. The dance has asymmetric beats. Another work with rhythmic asymmetry is The Rite of Spring. It is the product of primitive Fauvist spirit. The dramatic narrative is created via rhythmic asymmetry.

No Waltz in the Park – Arnold Schoenberg’s Vienna and Expressionism. Vienna was the heart of the Austrian German musical tradition. His music was a continuation from German music. Many Germans and Austrians share the same language and cultural heritage. In the 19th century, expressionism was born. Schoenberg was a pure Romantic. To him, the artist should express himself to the fullest. He was born in Austria. The good thing about Vienna was that there were many composers there. He eliminated dissonance from his music. He composed 21 songs known as Pierrot Lunaire. It is basically a set of sophisticated cabaret songs. The poems follow a A-B-A form. Pierrot is the clown who has the ability to commit heinous crimes. The piece is so revolutionary that it can’t be compared with anything else.

The sound and expressive content of a given era’s music – are a function of the larger environment and a composer’s response to that environment. – Robert Greenberg

When we listen contextually – with the life and times of the composer in mind – we realize that no great piece of music is conventional. – Robert Greenberg

 

Music Selections

Johann Sebastian Bach – Brandenburg Concerto 2; Fugue in C minor; Cantata no. 140; Passacaglia in C Minor; Brandenburg Concertos

Ludwig van Beethoven – Symphony 1, 2, 3, 6, 5, 9 ; String Quartet in E-flat Major; Piano Sonata in G major; concerto in D Major for violin and orchestra; Diabelli variations for piano

Hector Berlioz – Romeo and Juliet; The Damnation of Faust; Symphonie Fantastique

Johannes Brahms – Hungarian Dance No. 5; Piano Quartet no. 1; Concerto in D Major for violin and orchestra; clarinet quintet in B minor; piano quartet no. 1 in G minor

Frederic Chopin – Mazurka in A minor; Polonaise in A major

Claude Debussy – Three Nocturnes for Orchestra

Mikhail Glinka – A life for the Tsar

George Frideric Handel – Messiah Overture; Messiah Hallelujah Chorus

Joseph Hadyn – Symphony no. 92, 88

Gustav Mahler – Symphony 3 and 9

Felix Medelssohn – Symphony no. 4

Wolfgang Mozart – Eine kleine Nachtmusik; 12 variations on twinkle twinkle little star; Symphony 39, 40, 41; Piano concerto 17; the Magic flute; The Marriage of Figaro; Don Giovanni

Nikolai Rimsky-Korsakov – Russian Easter Overture

Gioachino Rossini – The Barber of Seville, ‘Una voce poco fa’

Arnold Schoenberg – Pierrot Lunaire no 1

Franz Schubert – Erlkonig and Symphony no. 9

Richard Strauss – Don Quixote

Igor Stravinsky – the Firebird; The Rite of Spring

Peter Tchaikovsky – Romeo and Juliet; Fantasy Overture

Richard Wagner – Tristan und Isolde

howtolistentogreatmusic

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Annual Conference and Global Internal Audit Leadership Summit 2017 (27 Oct)

Managing Cyber Risks. (KPMG) Cybersecurity is one of the top 5 risks as rated by CAEs. Cyberattacks are one of the top 3 man-made risks which can be addressed. In a survey, Asian CEOs aren’t as well prepared as their US counterparts when dealing with cyber risks and cybersecurity. There is a need for cybersecurity risk assessment. Sometimes, insiders can provoke a cyberattack too. Due to the widening of the digital footprint, it can lead to greater cybersecurity threats. External threats like new technology, technology change, regulatory compliance and changing market forces will continue to affect the cyber landscape. The new cybersecurity bill by CSA is slated to be released in Feb 2018. The Bill will affect CIIs from 7 different industries. The cyber risk gap needs to be plugged through the use of specialist reviews and audits. Some of the losses that an organization could face are theft of client information, IP, corporate date, DOS attacks etc. Nowadays, it is quite common for the attacker to attack your service provider (since there are less strict internal controls) and get information from them about your company. Some of the staff from your vendor might not be well screened also. Usually, there is no point trying to figure out who the cyber-attacker is as it is hard to prosecute if it’s not in Singapore jurisdiction. Some of the tactics that cyber-attackers use is ransomware, key loggers, phishing, insider data theft and man in the middle attacks. Do not give away passwords at any cost. Training/education is important, more so that IT tools at times. As auditors, we can audit the data classification in an organization. Cybersecurity is a growing factor and needs to be included as a risk indicator. There needs to be a detailed response plan after being attacked. There is also a need to link the cybersecurity threats to your business. One can read the ISO27000 series, MAS TRM Guidelines, NIST, COBIT and others.

SAP Case Study. (SAP) SAP is a German company. Maintenance costs is a big part of the implementation costs of having such an ERP software. For SAP itself, some of the risks facing the organization are acquisition risks, cloud computing etc. Within the audit team, they use the SAP Audit Management Software, which is automated from the end to end auditing process. One will be able to see clear audit plan overviews and also real time status updates of the plan. There are also resource management tools in place which will help improve the global resource transparency. In addition, there are audit executive dashboards in use. All these lead to better cost savings, user satisfaction and faster audit cycles for the organization. As a result, during quality assessments, the IA function scores better. Analytics helps in audit sampling for auditors.

Internet of Things. (Microsoft) The Internet has shifted from the Internet of content to service to people and now to ‘Things’. Internet is very commonly used nowadays as it is more efficient and has led to increased productivity. It has brought the whole world together through Skype. There is data in chips in our everyday devices and such data can be harnessed for decision making. Some of the benefits of IoT are that it leads to 1) safety, comfort and efficiency; 2) faster decision making; 3) revenue generation. Some of the risks of IoT are 1) privacy, security and legal (types of data collected can be collected and should be collected etc). The major challenges that will be faced are to obtain the business and IT buy-in and also the fact that data magnitude can be huge and complex and hard to interpret. It is important for IA to stay ahead of the changes and understand the risks emanating from IoT. We need to be trusted advisers to the business. CAEs need to determine the skillsets required, like from data scientists, private specialists etc. IA needs to recruit the right people. We need to change our approach to how to audit etc. The process flow is like this: device connection -> data sensing -> communication (access rights) -> data analytics (queries etc) -> data value -> human value

Data Analytics at MAS. (MAS) Data is the new AIR that we breathe. Insight is the new storage of value also. There are a few Vs we need to be aware of: Veracity, Value etc. We have approached the other departments, like banking, insurance and capital markets, to understand what are the pain points of these departments. We have moved from rule based (AML + STR) to machine learning. There is a strong need to enforce data quality and to move from just big data to smart data. Labels must be given for supervised machine learning in order for it to work more efficiently. However, there is also such a thing as unsupervised machine learning etc. For data, there is a need to achieve generalisability. An important question to ask is whether your model can work on future data? Or just past data? Ensure that your data can be interpreted and cleaned before it can be used. The process is as follows: 1) know the question; 2) understand the data; 3) find the right algorithm; 4) be aware of the limitations; 5) be sceptical; 6) automate; 7) experiment. It is important to share insights across the different departments. Machine learning is a programme which automatically improve its performance through learning and experience. Culture is hard to change and in fact, culture is more important than the application of an algorithm.

Cybersecurity Lessons Learned. (SWIFT Asia Pacific) SWIFT is a co-operative that is based out of Belgium. Nowadays, cyberattacks are tailored for a particular institution and that can be really scary. Hackers are now able to perform multi-stage attacks. There is a hacker collaboration space in the dark web. Cross-border banking usually requires the use of SWIFT. Hackers have different motivations for committing crimes and it is difficult to predict. Cyber must be managed from the top-down. One needs to understand that spending money doesn’t make you more secure and there is a need to evaluate cost-benefit analysis. At times, it could be the client servers which have issues. There is a need to dictate how the client runs their programmes in order to secure their environment. There needs to be a cyber-response plan in place to address attacks and to recover. In future, SWIFT would make it compulsory for banks to report on their compliance to SWIFT’s assurance framework. This will certainly help to improve transparency.

Ethics in a Digital World. (Avande) Avanade is a cloud service provider and is a partnership between Accenture and Microsoft. In this digital age, there is a debate between Personalization vs Privacy. Facebook tried to have two bots chats with one another, but they turned racist and eventually had to be put down. Although AI development is swift, it might be necessary to put the guardrails on AI and curb its growth in view of ethical considerations. What is morally acceptable in today’s society? What is lawful? Digital is becoming a way of life and ethical behaviour is vital in this day and age. Is there a need for a framework to manage ethical dilemmas? What are the possibilities of digital tech? Core ethical values are embodied by leadership and there needs to be a good tone from the top.

IA in the Age of Transformation. (Asia Pacific Black Sun, Sofitel Singapore, UOB, NTUC, EDB) What are the elephants in the room? This refers to important issues that are not being addressed by IA. IA needs to keep themselves relevant. 43% of jobs in Singapore can eventually become automated (mechanized, robotized, digitalized) etc. However, there are still many opportunities in the audit space to add value. IA needs to be high tech, high touch (build strong relationships with management), and high trust. IA’s job is to highlight exceptions to management and in order to do so, they need to be loud and courageous in the boardroom and not shirk from difficult conversations. IA needs to avoid getting on the newspaper. IA needs to familiarize themselves in the area of sustainability reporting and professional scepticism. IA needs to constantly update themselves through attending training etc. Industrial domain knowledge is also important and this is usually learnt on-the-job. People retention is important and there could be a risk of knowledge loss without people. There is a need for IA to provide inputs on controls for IT projects right at the start. If there are no audit findings, it is possible for IA to issue a clean audit report. IA should gradually take on a more advisory role for the business.

auditing-service-singapore

Annual Conference and Global Internal Audit Leadership Summit 2017 (26 Oct)

Opening Address by Guest of Honour (Professor Tan Cheng Han). (SGX RegCo) Singapore Exchange Limited (SGX) has moved to a disclosure based regime for markets for regulators. Shareholders are active and can ask questions of the management or try to get rid of a few directors. There is a need to listen to businesses nowadays when trying to propose new regulations. We have moved from a prescriptive to a more principle based form of regulation. Nowadays, we listen to market participants and seek their inputs. We live in an uncertain world. Lawyers should facilitate transactions and not simply keep telling people want they cannot do. They should guide people to be able make decisions within the legal framework. In this way, it is similar to what Internal Audit does. As an auditor, it is important to stand your ground and do the right thing, all the time.

Transforming Internal Audit. (AIG) It is important for IA to be clear of their role. Internal Auditors should read the ‘Common Body of Knowledge’ by IIA and also the ‘Global Trends of 2030’. Our job is to find things and to help management see things that they have not been able to see (i.e. provide assurance). Many companies have evolved over the years, like IBM, GE, Rakuten in order to stay alive. Some might have to abandon their traditional model just to keep afloat. IA can also read ‘The Fourth Industrial Revolution’. Internal auditors should all get the Certified Internal Auditor certificate and show that they belong to a professional body with high standards. We all need to comply with IIA standards. The current IA role is shifting from one of assurance to also one of advice and insight. Some of the more recent trends in internal audit include performing data analytics on the whole population. Combined assurance is also one of the up and coming trends in Internal Audit.

In Conversation with an Audit Committee Chairman. (SIA, DKSH) The IA team in PwC has grown tremendously since its inception. The role of IA is to provide an independent assurance on governance and risk management. Is the level of risk management adequate for the business? IA should also get inputs from management on their performance. One factor to judge the CAE is on whether the audit plan is incomplete and what the status of the plan vs is the execution. One option is to conduct a 360degree feedback exercise. A CAE’s pay package should be established by the remuneration committee and with inputs from the audit committee. The bonus paid is relevant to the company’s profits and individual performance. IA is a business partner and must not be seen as competing/slowing down the business. There is a need for internal auditors to retain a strong ethical and moral compass when discharging their duties. If you feel you are being mistreated by management, do highlight this fact to the Audit Committee. In cases of disagreement with management, it is important to highlight to the AC what is your position. It may be wise for audit partners to resign from the audits where there is serious disagreement with management. Before joining an organization, it is important to try and assess its culture and whether the culture is ethical etc. The CAE must be outgoing and interact seamlessly with other stakeholders. He must demonstrate leadership potential etc. One way to assess that is through conducting reference checks on his background etc. It is not necessary for internal auditors to have accounting backgrounds. However, it is difficult to be a CEO without a finance/accounting background. In general, having a diverse IA team is important. As the chairman of the AC, it is important to do preparatory work and also to meet the IA informally a few times a year. For young auditors, it is important to spend on your own career development and set 3 year career plans on what do you want to achieve etc.

Innovative and Agile Internal Auditing at Google. (Google) In Google, the employees practice moonshot or 10x thinking and they try their best to think differently. Waymo is their project on self-driving cars. They have many interesting projects like on Calico, Capital G, Deepmind, GV, Jigsaw, Nest, Sidewalk Lass, Verlly, Waywo, X etc. Google was incorporated in 1998 by Sergey and Larry. Read the Founders’ letter to get an insight of some of Google’s core values. Also, on their website, there is a hilarious list of ’10 Things we know to be true’. Their IA has also to fit in with the culture at Google and they are moving away from SOX compliance to other forms of combined assurance. An intense level of collaboration is expected at Google. They use many syncs, tools and techniques to get their work. The stakeholders are usually understanding and it is not difficult for IA to receive information. Also, the IA team uses software so that the client can see the IA reports at any time and also there is live QnA that happens every Friday. The software will enable the IA team to view the project status live and also to view audit working papers. Audit findings are tracked using software. As for hiring, Google looks for collaborative people. As for other skills, Google looks out for cognitive abilities, role knowledge, leadership and Googleyness. The top down approach doesn’t always work and Google tends to empower employees instead. Due to the speed of change, the IA team only develops a 6 mth rolling audit plan and revises it accordingly due to changing level of risks.

Auditing Big Data. (New York State Office) In the New York auditors’ office, the IA role has been expanded to include both artificial intelligence and data analytics. Big data makes decision making easier and faster. Avoid rolling out apps when not many have access to the network. The greatest opportunities will come at a risk. You have to get comfortable with being uncomfortable. There is a need for big data and technical skillsets. Big data is large, complex and covers many complex data sets. There is a trend of lower cost of data storage. Despite this, data tags will help in the data retrieval. Big data has really helped the audit team in NY to improve the audit efficiency and effectiveness. There are mainly 4 risks associated with Big Data: 1) program governance; 2) tech availability and performance; 3) security and privacy; 4) data quality, management and reporting. When using big data, it is important to ensure that there is no invasion of privacy and that it is legal to collect and use any particular form of data. It’s a massive leap to fully integrate by data and analytics. The auditors analyze social media like Craig’s list to detect unlicensed car repair workshops etc. The team also builds AI when it is not available.

Geopolitical Risks – What does it mean to Organizations and Internal Audit? (Focus Strategic Group Inc) Internal Auditors need to understand global and regional trends facing them. There are many geopolitical risks in this world and these threats can lead to supply chain disruptions. There is a massive distribution of wealth problem in this world. Some of the major events that have impacted the world are the Israel/Palestine conflict, war in Syria, Greece debt, Brexit, appointment of Trump, Spain/Catalonia separation. There is an increasing trend of protectionism for major economies and these countries are also against immigration. Trump is against the North American Treaty agreements, the TPP etc. In this world, there is only the certainty of uncertainty. People fight over many things, like land, resources, religion, perceived inequalities etc. China is also striving for more economic co-operation and wants to be the next Superpower via their one Belt one Road programme. They are also looking at how to harvest resources in the Arctic Circle. China started the Asian Infrastructure Investment Bank (AIB) and there are currently 57 countries on board with them. This bank can help provide funding for major infrastructure projects. The 3 prominent tech companies in China are Baidu, Alibaba, Tencent etc. In IA, we need to ask ourselves whether our organizations are secure. There is also a frequent need to check asset risks, read up on the latest news and check countries’ sovereign ratings. It is also possible to buy insurance to cover losses arising from geopolitical risks.

Panel Discussion: Transforming Internal Audit. (VISA, GIC, Google, SIA) There is a need for internal auditors to develop a more diverse set of skills especially in this world of digitalization. IA can be the change agent and also shape the company’s culture. For listed companies, IA can check compliance with the listing rules with methodology. The modern IA role is beyond compliance and more towards advisory. There may be a need for IA to revamp its methodology and include the need for analytics. IA needs to be proactive, adaptable and diligent. As auditors, we need good communication and networking skills and have the willingness to do things better. There is a need to use CAATs like Qlikview, SQL, Tableau to improve data analytics skills. There is a need for executive support before a data analytics programme can be rolled out successfully. One should start with the small DA projects with ROIs in order to show to management that it can work. An advanced maturity of data analytics would include things like predictive/behavior analytics and robotic process reengineering/augmented intelligence. Whereever possible, it would be good for IA to be able to automate its processes. IA can perform the prediction and look through the red flags. It is important to have good mentors who will grow and support you in your relationship. Auditors need to be curious and learn continuously. Company culture can be assessed via analytics and by the conducting of employee opinion surveys.

Internal-Audit

audit financial company tax investigation process business accounting

Astrophysics for People in a Hurry by Neil Degrasse Tyson (Part 2)

The Cosmos on the Table. How did the Earth’s crust acquire the materials? The answer is astronomical. Only 3 elements were natural in the big bang process. The table is a cultural icon for humanity. The periodic table is very interesting indeed as each element has different characteristics. Hydrogen has only one proton in its nucleus, and is the lightest and simplest element. It also forms the core of Jupiter. In the sun, hydrogen collide to form helium. It is not so combustible in nature as hydrogen. It is the second most common element in our Universe. On average, it is about 10% of all atoms. It has 92% of hydrogen’s buoyancy, but without its explosive characteristics. Lithium has 3 protons in its nucleus, and was made in the big bang. Carbon is found in all kinds of molecules and is very abundant. This is the basis of chemistry and all diversity of life. Is it possible to have life forms based on silicon? Sodium is a common glowing gas in street lamps. Aluminium occupies 10% of the Earth’s crust. Titanium is twice as strong as aluminium. It is mostly used for military aircraft etc. The number of oxygen atoms exceed that of carbon. Excess oxygen might bond with titanium to form titanium oxide etc. Iron is one of the most important elements in our universe. It has 26 protons. Gallium is a soft metal that has a low melting point. Technetium is radioactive in nature and is artificial. The book features other interesting metals, like osmium and iridium. It is very dense indeed. Most atoms actually come from Greek names, like Phosphorus, Selenium etc. Ceres and Pallas are asteroids found in the asteroid belt. Uranium is a radioactive element named after Uranus. Neptunium is named after Neptune in 1940. Pluto was eventually dismissed a planet. Plutonium is named after Pluto and was used by the US to bomb Japan in WWII.

On Being Round. Most objects are spherical in nature. It is affected by surface tension. Due to gravity pulling at every area, the Earth is largely spherical in shape as the mountains are very low compared to how big the Earth is. Olympus Mons on Mars is 65,000 feet tall and 300 miles wide at its base. The weaker the gravity on an object, the taller the mountains can form. Non-spherical shapes on Phobos and Deimos form because of the low surface gravity. Stars are near perfect gaseous spheres. However, if it is too close to a massive star, some material can be stripped away. Our Milky Way galaxy is more flat, than spherical. It used to be a spherical, but collapsed at its poles as it spun faster and faster. The Milky Way is neither collapsing nor expanding. It is a gravitationally mature system. Saturn looks like a hamburger and is flattened because of its fast rotating speed. A pulsar is like squeezing the mass of a Sun into a ball the size of Manhattan. The pulsars are the most perfect spheres due to their huge mass and small space. Different galaxy clusters have different shapes and there are no fixed shapes. The entire observable Universe seems like a massive sphere as it is receding in every direction we look. However, as the Universe is expanding faster than the speed of light, there will be some galaxies whose light will not reach us and we will know nothing about them.

Invisible Light. Not all light is visible. There are 7 different colours to the visible spectrum. Different colours have different temperatures. Herschel was the first man to discover infra-red light. UV light was also discovered soon after. Low energy and low frequency to high energy and high frequency is radio waves, microwaves, infrared, ROYGBIV, ultraviolet, X-rays, and gamma rays. There are countless applications for such different spectra of light. Eventually, we built telescopes to detect parts of the EM spectrum. The Universe is actually sending light that our eyes cannot see and we would be dumb not to see it. Even long after supernovas explode, infrared red and radio waves get emitted. There needs to be different mirrors and detectors to detect all light bands. Radio telescopes are extremely large. China has built the world’s largest radio telescope, ranging over 30 football fields large. Humans also developed interferometers. We have 66 large antennas of ALMA to detect microwaves. There are high frequency, high-energy gamma rays with wavelengths measured in picometres. They are measured using a scintillator and we can pump out electrically charged particles that collide with gamma rays and produce light. There were frequent flashes of gamma rays near the Earth which could not be explained. Radio telescopes can detect gas among stars in the galaxies. The different types of light can tell us so much about star formations etc.

Between the Planets. There are plenty of chunky rocks, pebbles, charged particles in between planets. A lot of the small meteors burn up in our Earth’s atmosphere. This helps to protect Earth from such impact. Long ago, a lot of debris hit the Earth, causing our hot and molten core. A lot of junk led to the formation of the moon. Many of the other planets like Mercury, Mars received bombardments, as per the craters in the ground. When a meteor strikes, the impact can cause rocks to emerge up as well. Some of the Moon’s rocks also hit our surface. The asteroid belt is between Mars and Jupiter. Some of them are really large and might destabilize the Earth if it hits the Earth. The Kuiper belt is located after Neptune. Halley’s comet is from this belt. There are some comets between our solar system and the nearest star. These are known as the Oort cloud. The magnetic force on Jupiter is simply tremendous. Some of the planets’ moons are really interesting to study. Io is tidally locked and interacts with other moons. It is the most volcanically active place in our solar system. Pluto and Charon have tidally locked each other. Moons are named after Greek personalities. The sun releases solar wind, which is a release of material from its surface at a rate of a million tons per second. These causes the beautiful aurora on Earth. Jupiter is our big gravitational shield from comets as it helps to defect them away. We also exploit their gravitational field when we launch probes to space.

Exoplanet Earth. There are plenty of beautiful things on Earth. You could probably observe many structures from up in space. Natural scenery and hurricanes, volcanic eruptions should be visible. Earth is just a pale blue dot from Neptune, 3 billion miles away. Earth appears blue due to two-third being covered by water. Once there is liquid water, there will be a stable pressure and temperature. Aliens can notice our weather patterns and even see our polar ice caps. The nearest star is Alpha Centauri, nearly 4 light years away and often visible at night. As Earth is not bright, it will be hard to detect via visible light. However, if you notice a star jiggle, it could mean that an object/planet has just orbited around it. The Kepler telescope is meant to detect other Earth like planets. It detects stars whose total brightness drops slightly and at regular intervals. From this, it can detect multi-planet star systems. Aliens might be able to detect the multiple radio waves that we emit. Light, throughout the Universe, behaves in the same way. Hence, it can be detected through a spectrometer. Methane is a molecule which indicates life stock. The alien’s best bet would be to detect oxygen in our atmosphere. Oxygen bonds readily with other atoms. We have discovered more than 3000 exoplanets.

Latest estimates, extrapolating from the current catalogs, suggest as many as 40 billion Earth-like planets in the Milky Way alone. Those are the planets our descendants might want to visit someday, by choice, if not by necessity. – Neil Degrasse Tyson

Reflections on the Cosmic Perspective. Learn to enjoy the pleasure of intellectual pursuits. Despite all the cosmic wonder, there are still horrible things happening on Earth. Some people are also selfish and do not help others. The world is big, but so should our hearts and minds be. Some adults feel that the world revolves around them and are very self-centered. People hold an expanded view of the cosmos. Humans experience a sense of smallness and insignificance after watching a show where they see Earth in the grand scheme of the Universe. However, I feel large and important. Human beings are not the most important thing in the Universe. Powerful forces make us susceptible. We are all part of this stream of human consciousness. The air and water you consume might have come from ages ago. We are largely made from the same atoms as when the Universe was formed. They are hydrogen, oxygen, carbon and nitrogen. We have to remain open to the concept of multiverses. The cosmos are humble, spiritual etc. They allow us to be more open to knowledge and to accept new ideas. There is no air in space, but yet we can admire its beauty from afar. Astronomy is good because it makes us more curious, and hungrier for knowledge.

Of all the sciences cultivated by mankind, Astronomy is acknowledged to be, and undoubtedly is, the most sublime, the most interesting, and the most useful. For, by knowledge derived from this science, not only the bulk of the Earth is discovered…; but our very faculties are enlarged with the grandeur of the ideas it conveys, our minds exalted above low contracted prejudices. – James Ferguson

Time to get cosmic. There are more stars in the Universe than grains of sand on any beach, more stars than seconds have passed since Earth formed, more stars than words and sounds ever uttered by all the humans who ever lived. – Neil Degrasse Tyson

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The End!

Astrophysics for People in a Hurry by Neil Degrasse Tyson (Part 1)

Preface. The public has become more interested in science. In addition, science fiction films help to generate even more interest. Astrophysics has always been on people’s minds. This book summarizes the major ideas and discoveries.

‘The Universe is under no obligation to make sense to you.’ Neil Degrasse Tyson

The Greatest Story Ever Told. Almost 14 billion years ago, the Big Bang occurred and matter and energy expanded. Scientists have worked to try to combine the understanding of the general theory of relativity with quantum gravity. Max Planck is the father of quantum mechanics. Currently, we have no known laws of physics to predict the behavior of the universe over time. The Universe split into the electroweak and the strong nuclear forces. The electroweak forces split into the EM and weak nuclear forces. All this happened in less than a trillionth of a second. Photos can convert their energy into matter-antimatter particle pairs under intense energy. After the interaction of electroweak forces, the universe was a soup of quarks, leptons, antimatter siblings etc. The photon belongs to the boson family. The electron and neutrinos belong to leptons. There are 6 different types of quarks (up and down, strange and charmed, top and bottom). Quarks have fractional charges that come in thirds. Now, a millionth of a second has passed. New heavy particles called hadrons started to form. Now, protons and neutrons started to form. The LHC attempts to collide hadrons to create larger particles. Matter and anti-matter will annihilate one another, but there will one single hadron will survive. Electrons annihilate with positrons, and only 1 electron out of a billion survive. Eventually, elements like helium, deuterium and tritium are formed. Below 3000K, electrons stop combining with nuclei. For the first billion years, our universe expands and cools, while galaxies are formed. More than a hundred billion of them are formed, each containing billions of stars. Some stars explode. Our Sun is simply an undistinguished star. Wayward debris would orbit and form large bodies. These formed planets and the matter would start to cool. Earth is in a Goldilocks zone where oceans are in liquid forms. The early organisms on Earth were simple anaerobic bacteria, which excretes oxygen as its by-product. Ozone was also formed and these protected us from the Sun’s UV photons. We are thankful for the existence of carbon and the various simple/complex molecules. However, often, there are asteroids that hit Earth and cause havoc to our ecosystem. There was one which made dinosaurs extinct. Did our Universe just pop into existence from nothing? The Universe will continue to evolve.

We are stardust brought to life, then empowered by the Universe to figure itself out – and we have only just begun. – Neil Degrasse Tyson

On Earth as in the Heavens. Some of the religious people criticized Newton when he discovered gravity. The 19th century was a time of invention. The Sun contained a lot of similar elements as Earth. Helium was discovered too. Do the law of physics apply to the whole Universe? We sent out the Pioneer 10 and 11 and the Voyager 1 and 2 in the 1970s to look for outside life. All these spacecraft used gravity assists to escape the solar systems. It is not clear whether aliens would understand them. The Big G is the constant of gravitation. Our Universe is indeed very uniform. The speed of the light is one of the most famous constants. It is simply a law of physics. It is not time or location dependent. The conservations laws of mass and energy, linear and angular momentum and electric charge are all very important. Most of the gravity in the Universe is the form of dark matter, which is difficult to detect. Should Newton’s law of gravity be adjusted to account for dark matter? Einstein’s theory of relativity builds on Newton’s law of gravity as it applies to objects of extremely high mass like black holes. The Universality of physical laws make the cosmos very appealing.

Let There Be Light. The cosmos expanded rapidly after the Big Bang. Cosmic background radiation can still be detected. Photons can lose energy and form infrared photons, sliding down the spectrum. When something glows, it emits light in the full spectrum, but there will be a noticeable peak. Cosmic background radiation (CMR) was already predicted into the 1940s. In 1948, scientists predicted what the temperature of the cosmic background should be. Their answer was unerringly accurate. The first cosmic microwave background (CMB) was observed in 1964. They developed an antenna to detect microwaves. There was a constant leftover signal in their measurements. The signal came from every direction in the sky. When we out into space, we are looking back in time as light takes time to travel. Depending on the time that the photons that scattered off electrons, a different colour profile would be registered. The CMB will have spots that are slightly hotter or cooler. Analyzing the CMB will enable you to determine how quickly matter accumulated etc. Dark matter has gravity but does not interact with light. It forces the Universe to expand faster.

Between the Galaxies. There are over a hundred billion of them. How much void is there in space? Our galaxy is the Milky Way. The nearest one to us is over 180,000 light years away. The nearest one which is larger than ours is the Great Nebula in Andromeda, over 2 million light years away. Our detectors have enabled us to detect many more objects. Dwarf galaxies contain only up to a million stars, and they are hard to detect. They are also dim. Often, these dwarf galaxies may get eaten up by the main galaxy. Galaxies can collide and clusters will be formed. There is also the possibility of homeless stars, which are not in any galaxy. Supernovas have been found exploding away from their host galaxies. Supernovas are stars which have increased their luminosity over a billion fold. There are also intra-cluster gas that is so hot and can form stars. Quasars are super-luminous galaxy cores and are extremely distant. These are fascinating due to their huge mass. There are hydrogen clouds everywhere in the Universe. These light also passes through huge sources of gravity. Light that appears to us might have experienced curvature due to gravity etc. There are plenty of cosmic rays in the Universe, which are horrible, and move almost at the speed of light. There are plenty of particle collisions in intergalactic space.

Dark Matter. Gravity is difficult to understand. It has the ability to warp space-time at a distance. For example, light rays bend as they pass by a massive object. The bulk of the gravity in the Universe cannot be explained. Fritz Zwicky analysed this problem in 1937. He noticed some galaxies had a very high average velocity. However, it does not account for the speeds measured. Newton’s laws show that it is possible to achieve an orbital speed to escape the clutches of gravity. Other galaxy clusters also reveal this same problem. This supports the existence of ‘dark matter’ in the Universe. Cosmic dark matter seems to have at least 6 times the gravity of visible matter. It is not matter that happens to be under-luminous or non-luminous. It turns out that dark matter and nuclear fusion do not mix. Dark matter does not seem to do very much. Dark matter only comes into play for large bodies, like the motion of stars around the centre of the galaxy. It seems to be well spread across the Universe. The Universe is expanding, but gravity wants to make things coagulate. We do not know what dark matter is, just that we know that it is real. Skeptics tend to slam dark matter’s existence. Dark matter is real, as it has been deduced from its effects on visible matter. We are trying our best to detect the presence of dark matter. Right now, we just have to be happy with our understanding of dark matter.

Either dark matter particles must wait for us to discover and to control a new force or class of forces through which their particles interact, or else dark matter particles interact via normal forces, but with staggering weakness. – Neil Degrasse Tyson

What we know is that the matter we have come to love in the Universe – the stuff of stars, planets, and life – is only a light frosting on the cosmic cake, modest buoys afloat in a vast cosmic ocean of something that looks like nothing. – Neil Degrasse Tyson

Dark Energy. Einstein perfected the thought experiments in his head and was very successful. His theories withstood the test of time. The general theory of relativity (GR) was published in 1916. Everything in the Universe moves under the influence of gravity. In 2016, gravitational waves were discovered, as were predicted by Einstein 100 years ago. These are created from major events, like the collision of 2 black holes. They first arose almost 1.3 billion years ago, during a collision of 2 black holes. In the 16th century, it was a heliocentric model. However, in truth, the planets revolve the star in ellipses. There was a cosmological constant in his equations of gravity. In his equations, the universe neither expands nor contracts. The masses move along straight-line geodesics. The Universe is never static. The cosmological constant was a big blunder as it was proven that the Universe was still expanding. There are ways to measure the distance from a supernova, for example, from its decreasing luminosity over time. Hubble telescope shows that distant objects race away from us further than nearby ones. Dark energy was present, but scientists could not explain it. Dark energy comprises of 68% of all mass-energy, dark matter only 27% and regular matter only 5%. The predicted shape for the Universe would be a one-way saddle. There is simply not enough mass to explain the Universe’s expansion. This was when dark matter came about. Dark energy helped to raise the mass of ordinary energy and dark matter to the mass-energy density. Dark energy helped to reconcile the differences. These could be simply virtual particles in a vacuum, which can’t be measured. It turns out that there was a place for lambda in Einstein’s equations. Do we need an alternative to GR? The repulsive forces are present in the vacuum, and will grow ever more with increasing vacuum. The fabric of the Universe can carry material faster than the speed of light. In a trillion years, you might not know other galaxies existed. As a result of dark energy, future generations will not understand our Universe. What else should we be looking for?

GR regards gravity as the response of a mass to the local curvature of space and time caused by some other mass or field of energy. – Neil Degrasse Tyson

Matter tells space how to curve; space tells matter how to move. – John Archibald Wheeler

Keep a lookout for Part 2! 🙂

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IIA Magazine Jun 2016 issue

A toxic culture is present when your work negatively affects your health – physically and emotionally. An example of such could be a change in management or management through fear and intimidation. The two options are to leave or to name the problem and discuss to make it better. Payroll should have continuous checks and balances. It is not good to report risks on an ad-hoc basis. Talent issues and development need to be addressed. There is a strong need to fight corruption. However, whistle-blowing hotlines might be underutilized, as employees fear retaliation after reporting. There are some companies which do not trust enterprise cloud deployments still.

The Fire Drill. Auditors can learn to deliver a focused message that results in management action. Effective planning of our work is the key. For instance, we can look at past audit findings. Next, one should compensate with competence, meaning backing up observation with data and experience. Sell with the passion of a champion. Findings should be sold to address a control weakness that is causing an unacceptable risk. One needs to communicate the big risks well. In the end, we need to deliver a focused message that can result in management action.

The Tech-Savvy Auditor. Effective use of audit technology can enable audit departments to provide valuable insights. Most IA staff are not familiar with IT or have weak IT backgrounds. This is not acceptable. Technology can lead to a more efficient audit and also might cut fraud losses. There is a need to improve the audit software. There should be a data analytics centre in-house. There is a need to review software usage.

Integrating Key Risks and Performance Indicators. IA can leverage its risk knowledge to improve operational performance and reduce risks exposures. IA can provide assurance on the achievement of objectives. IA can encourage the formalization of KPIs and KRIs. KRIs can serve as an early signal of increasing risk exposure. There needs to be a formal project charter. There needs to be a KPI framework with proper planning, reporting, monitoring etc. The key metrics need to be identified and a dashboard can help to present graphically the results. The KRI should be closely linked to the KPI.

Toxic Leaders, Toxic Culture. IA can identify unhealthy behaviors that may undermine the organization. Culture will affect an organization’s success. Therefore, identifying the toxic leader is important. Toxic leaders want power and control. These tend to be autocratic leaders. They could have a strong sense of entitlement and focus on themselves and not the organization. Exerting power through fear can undermine morale. They do not like to be challenged and seek to manipulate others. Closed-minded leaders think of ‘My way or the highway’. There is no need to confront the toxic leader. IA can refer the person to compliance or legal counsel. One can use behavioural psychology to analyse. For a more objective method, one can look at the reasons for turnover and examine turnover rates. One can also look at employee engagement survey results. One needs to use experience and facts as much as possible.

Analytics and the small audit department. No matter the size of an audit function, analytics can be implemented for big gains. How to go about using analytics? Some simple ones to consider are benchmarking, variance analysis, ROA, turnover etc. The analytics must have goals and performance measures. Selecting the right data source is the key and there is a need to verify the accuracy of the source. Brainstorming can help to identify key data. It is crucial to have a plan that will allow IA to continue to improve its analytics capability. It is important to attain small wins in analytics.

Business Risk. Keynote speakers for this year’s IIA International Conference identify emerging risks facing organizations. Cyber risks is at the top of the priority list for many. Ransomware is a big threat to hospitals nowadays. Other threats include politics, the economy and terrorism. Social media risks sometimes aren’t within an organization’s control. Auditors should use corporate culture to work in their favour. An organization must monitor the external environment closely. There should be a common understanding of what the risk appetite and risk cultures are. Audit needs to adjust fast and invest continually in education. IA now also needs to learn to be innovative.

An Anti-corruption Check-up. Capability maturity models can help organizations assess the effectiveness of the anti-corruption programs. This model was developed at Carnegie Mellon University. One can use the model to identify strengths and weaknesses. There are basically 4 levels of maturity. There are 7 components that form the basis of anti-corruption maturity model. There is a need to tally the scorecard too.

Craft Our Role. IA should create the role for themselves that is best for both the organization and their own personal development. IA needs to be ingenious, use creativity and resourcefulness when developing their role. Do not limit the scope to be too small. It is important to be familiar with the business in order to value add properly. The control environment needs to be evaluated properly. One can develop business acumen. It is crucial to ask the right questions. IA should network more with the other departments to build rapport and also to get a feel about the management style in the department. Learn to practise combined assurance. One can work with another dept for a joint review. This is the way to maximize external resources.

Fraud and related-party transactions. IA can identify red flags and reduce the risk and impact of related-party fraud. IA need to be able to recognize related-party fraud risks. Providing loans at below market rates is a red flag. Failing to disclose the related-party nature of the loan is a red flag. IA should try to identify related party transactions. Try to identify whether employees have link to companies that transact with the organization itself. It is also possible to compare cost variations among vendors to see how they differ from the average cost. The organization should not pay costs significantly above market prices.

Communicating Results. Sharing audit observations is one of the most important tasks auditors perform. Communicating properly can help enhance rapport. Make sure the observations are correct and are not challenged by management. Plan the timing of issue dissemination, which is as soon as possible. Try not to surprise management at the end of the audit. Write clearly. Exercise diplomacy.

‘One of the quickest ways to lose management’s respect is to make it clear that IA does not understand what is has been auditing. The answer is to take the time to learn the business, processes, and risk associated with the audited area.’

Care and Feeding of The Company’s Culture. How can IA help to ensure a healthy organizational culture? Auditing culture is certainly work examining. Healthy organizations should have guidance on norms and expectations and a healthy tone at the top. Transparency is important. Management should think long term and have a sound strategy. Ask yourself whether the root cause is behavioural or cultural in nature. The problem with culture is that it is not clear cut and might be hard to evaluate. Those who are toxic in nature might be held accountable and be responsible.

Internal-Audit

 

IIA Magazine Feb 2017 issue

IIA Feb 2017 Issue

Internal Auditors need to provide maximum return on investment and audit the right things. They need to understand the company’s strategic mission, objectives and KPIs. More auditors need to base their work on the International Standards for the Professional Practice of Internal Auditing.

The 5 emerging threats are (i) global economic uncertainty; (ii) increased regulatory burden; (iii) significant industry changes; (iv) business model disruption; (v) cybersecurity threats. Global economic uncertainty seems to a bigger risk in 2017 as compared to previous years. In the compliance space, with the new US administration, enforcement areas could see some change. Trump could change the legislative, regulatory and executive actions under Obama’s reign.

Although most companies feel that they could detect a sophisticated cyberattack, many of them do not have an adequate communication strategy in the event of a significant attack. Also, some of the BCP might be lacking. The continuous monitoring of cyberattacks is also a challenge.

Data Mining. By leveraging data, internal auditors can address issues beyond the reach of traditional analysis techniques. It involves making use of data which had previously no formulated relationships, patterns. Artificial intelligence, machine learning, statistics and database systems all come into play. Some of the techniques auditors can use are predictive modeling (IF), data segmentation (data clustering), neural networks (artificial intelligence), link analysis (links between records), deviation detection (red flags). The use of email mining can identify red flags in fraud etc. Social network analysis is also possible. IA should continue to look for ways to innovate their audit testing.

Intelligent Assessments. Use cognitive technology to help identify high-risk areas. These are intelligent computer systems that can aid in the performance of risk assessments. For instance, this tool can extract and analyze text from audit reports and analyze trends and high-risk areas. Natural language processing (NLP) has the power to tap into every sentence of every report to churn out more information. The machine will convert text to a certain structure and add meaning to the text and teach the computer to understand audit concepts. Words like ‘fraud’, ‘finding’, ‘auditee’ can be flagged out.

Turning Up the Heat on Fraud. A fraud risk assessment can help auditors take the organization’s ethical temperature. There are many ways to do it, example, through surveys, focus groups, workshops etc. The focus is mainly on fraud risk. It works best in small brainstorming sessions with operational management. Using the ACFE’s Fraud Risk Assessment Tool can be useful as it provides a structured approach. Risk assessment is about identifying where fraud might occur and the potential perpetrators. IA can do surveys to measure the ethical climate and voting can be anonymous. The results of the survey can be discussed with management. If there are high risk areas with fraud risks, IA can pay more attention to them.

The Accidental Discovery. Small or remote locations can be more susceptible to embezzlement, especially when they are not audited regularly. Confront someone after the facts have been reviewed. Look at the big picture. Controls that aren’t operating effectively are as good as them not being there.

Auditing what matters. Add value by selecting audits that contribute to achievement of strategic objectives. Auditors now should start looking at this area. Look at where the company spends the most money, what their main programmes are etc. Find out who is responsible for the strategy and make them IA’s stakeholders. Traditional audit activities can move towards strategy too. IA should use the COSO ERM framework in its entirety. The aim is for IA to a strategic partner to management. Don’t fear failure and find out more from the auditee by talking to them. The trick is to engage with processor owners easy and evaluate control design. IA should do the following: (i) Identify and define the risks; (ii) rate the risks; (iii) address risks in detail. Getting management buy-in is also important. The CAE must convince the AC to highlight the need for a strategic approach. Most IA wants to be a trusted advisor.

Core Principles and the QAIP. The new IPPF in 2015 can be incorporated into the QAIP to show that the IA is aligned with the mandatory IPPF elements. Learn to develop a concept and approach that is easy to understand. Core principles are a mandatory element of the IPPF. IA need to have general conformance with the Code of Ethics and Standards. The 5 steps are (i) establish a maturity framework (ineffective, partially effective, effective, sustainable, world class); (ii) map core principles with the standards and code of ethics; (iii) Define characteristics of maturity in 3 aspects of standards and QAIP characteristics, infrastructure and process characteristics, core principles and specific characteristics; (iv) perform internal and external assessment consistent with requirements of QAIP; (v) Evaluate and report maturity levels for core principles.

Champion of Trust. By modelling high standards of ethical behaviour, IA can help shore up faith in the organizations they serve. How can IA be a trusted advisor that is well respected? One way is via ethical commitment. IA needs to model ethical conduct in everything they do. IA must have the courage to sound off before things get in trouble. Ethical commitment is the key to a well-functioning IA. Ethics should come naturally to all. We also need to build ethical resilience (integrity, courage, honesty, accountability, trustworthiness).

Infusing IT Auditing into Engagements via a three-phase approach. The tech sector is growing at a rapid rate. Internal auditors also need to develop IT-related capabilities. IA needs to think about the future of integrated auditing. For a start, IA can incorporate IT perspectives into current audit engagements. This can involve documenting down what are the IT automated controls. One can also read IT policies or those on change management. One should also identify resources and pinpoint where they are stored (example: servers). Map core IT resources and data to key business objectives. Respond to IT risks and identify audit objectives that can add value. An integrated audit can help in this. In the middle term, IA can build an IT audit team, understand the IT framework like COBIT, perform IT audits and also foster relationships with IT and management. In the long term, IA can leverage on data analytics and obtain professional certifications (like IIA and CISA).

Breaking Down The Standards. With the right strategy, practitioners can divide conformance into bite-size, easily digested portions. The standards consist of attribute standards (series 1000 to 1322) and performance standards (series 2000 to 2600). Some IA may neglect the attribute standards and focus on the performance standards instead. However, both are very important. IA should perform an assessment of how well they are conforming to the Standards. An external assessment must be conducted once every 5 years. The audit work program needs to be reviewed and approved by the CAE before engagement commencement. Ultimately, conforming and understanding the principles behind the Standards are important.

Auditing Organizational Governance. IA has an integral role to play in improving the organization’s strategic performance. This area is becoming increasingly important in recent years. Governance reviews can help prevent governance failures. Less than 1 in 6 IAs conduct reviews for their organization’s strategy. Sometimes, it might be difficult to conduct a separate governance review. Rather, it might be easier to incorporate it as part of routine audits. One can focus on both the governance structures as well as the organizational culture. Some of the soft controls can include management competence/style; mutual trust and openness; strong leadership; high performance and quality expectations; shared values and understanding; high ethical standards. However, for some of these measures, there are no hard data to analyse. Hence, it is important for IA to read the signs. IA can also provide a more advisory role, which is educating board about developments and trends in the industry and governance best practices. In terms of strategic reviews, IA has much to work on. There is a tendency to focus on weaknesses in financial reporting etc.

Good Governance is All About Quality. The 5 quality rules are (i) customer focus; (ii) management leadership; (iii) Teamwork; (iv) Measurement; (v) Total commitment to continuous improvement.

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