Delwin Witthoft of Philips Envisions Internal Audit as a Transformational Force

Join Richard Chambers for a new episode of his Agents of Change video series, featuring conversations with internal audit leaders from some of the world’s most prominent organizations about innovation in the profession. In this episode, Richard sits down with Delwin Witthoft, Head of Internal Audit at Philips, to discuss the role of internal audit in navigating uncertainty, leveraging integrated assurance, and embracing emerging technologies like AI, including:

• Why internal audit must evolve beyond merely providing assurance to become a transformational element that brings forth new ideas and drives organizational improvement.
• The benefits of integrated assurance, with internal audit and risk management functions working in tandem to gain a connected view of risks and opportunities.
• The promising future of AI in internal audit, enabling analysis of entire data populations and allowing auditors to focus on problem-solving.

Watch the full conversation, and read the can’t-miss highlights below.

The Transformational Role of Internal Audit in Uncertain Times

Richard Chambers: Delwin, this idea of agents of change is something we discuss frequently. I recently updated my book on Agents of Change to a second edition, emphasizing that the traditional role of internal audit as merely an assurance provider – involved in hindsight and assurance – has to change. Internal audit must become a transformational element within an organization, bringing forth new ideas and helping the organization improve. What’s your assessment of that role for internal audit?

Delwin Witthoft: I fully agree. Audit has to remain the assurance provider, but only focusing on hindsight won’t help the company actually grow and meet the competitive challenges going forward. Auditors need to do more than just checking. They’re there to identify opportunities for improvements that actually help organizations move forward.

The Importance of a Holistic View of Risk

Richard Chambers: We seem to lurch from one disruptive event to another: from pandemics, to wars, to inflation, to supply chain issues, to talent shortages — it just seems to never end. What do you think internal audit’s role is — or should be — in helping organizations navigate this kind of uncertainty?

Delwin Witthoft: At Philips, internal audit is unique because the Enterprise Risk Management team also reports to me. The risks you mentioned are front and foremost in mind as we not only help the organization identify and act on the risks, but also use that to inform the Annual Audit Plan. We follow those risks to provide the assurance needed, make changes where necessary, and seize opportunities. 

Richard Chambers: You mentioned you also oversee the risk management function, which is common in many publicly traded companies. In fact, in the United States, over 40% of publicly-traded companies’ internal audit functions also have the risk management function. This facilitates what we call connected risk. The more connections you have between audit, risk management, compliance, and your CISO, the more likely the organization’s going to have a connected view of risk. What do you think is the biggest benefit of having responsibility for both internal audit and risk management?

Delwin Witthoft: What you’re referring to, I call “integrated assurance.” Before becoming Head of Internal Audit, I was the Chief Accounting Officer, overseeing the SOX team. I saw the synergies between the SOX team, the enterprise risk management, and now the audit team. This background helps in creating a holistic view and connecting with other compliance functions. We started analyzing risk interconnectivity last year, mapping how risks interplay and their potential impact, which is crucial for both immediate and long-term audit planning.

Instituting a Rotational Program to Navigate Talent Challenges in Internal Audit

Richard Chambers: We talked about the challenges of the environment we’re in. The number one challenge Chief Audit Executives talk about — the thing that keeps them awake at night — is finding and retaining the right talent. Having internal auditors who have expertise in key technologies and in the business. How do you navigate that?

Delwin Witthoft: Audit is a people business, and finding the right talent is my number one challenge. We have a rotational model where auditors stay for three to four years before moving back into the business. That means that you need to find the new talent to learn our methodology, spend time to identify the opportunities, and then move back into the business market or function — and that is a challenge. Recent changes, like hybrid working, have made audit roles more appealing due to reduced travel burdens. Rather than for three or four weeks in a row, they travel for one week to do the site visit.

Leveraging Experience in the Business for Enhanced Audit Coverage

Richard Chambers: How did your background in the business help you as the Chief Audit Executive? What advantage do you think that gave you having served in other roles, especially in dealing with the recent disruptions?

Delwin Witthoft: Firstly on talent, you have to have that connection and network within the organization to know who the stakeholders are on the one side and where the talent is on the other. Secondly, it helps me understand the risks. Since I have responsibility for enterprise risk management, and I have proximity to what we are doing, I know what challenges we’re facing, what our stakeholders are expecting, and what our regulators are expecting to actually then make that transition. 

Richard Chambers: You’ve been in that role through all of the disruption that we’ve seen. How do you think internal audit, under your leadership, has helped the company address some of the disruptive forces at work? 

Delwin Witthoft: Philips has been going through a tough time recently and it’s put more onus on audit to be that change maker. It’s not just checking that the basics are there. Internal audit is also looking at all the transformational projects that have been put in place to improve quality, to address legacy issues, and to get the company ready for the future. We have an excellent opportunity to spot the opportunities in this network of events to see how the company can move forward. An enabler that we haven’t touched on yet is technology, because that’s going to be a really important element going forward to make this all work.

The Impact of AI on Internal Audit

Richard Chambers: I don’t go a day without somebody wanting my thoughts about technology, in particular about AI and its role within internal audit. What are your thoughts on the relationship between internal audit and AI and how do you see it evolving?

Delwin Witthoft: We’re at the early stages of integrating AI in internal audit at Philips. AI is already built into some of our medical products, and now we’re exploring its potential in audit. With AI you can sample 100% of a population… the auditor’s time is then spent solving a problem, rather than working out what went wrong. The future of AI in internal audit is promising, but it also requires talent that understands technology and can ensure its proper use and compliance.

Check out more audit leader interviews with Richard Chambers on our Agents of Change video series channel.