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Video Blog: How to Transform an Internal Audit Department?

Interview with Alan Philips, CAE of Cheesecake Factory

Some of the biggest challenges in Internal Audit today apply to ALL fields, companies and industries. We had the pleasure of interviewing Alan Phillips, Vice President of Internal Audit at your favorite place and mine—The Cheesecake Factory. Among other things, did you know there was such a thing as National Cheesecake Day? Every year on this day, The Cheesecake Factory comes up with a new flavor…yum!

Transformation Step 1: Hire the Right People.

Guess what? Industry knowledge is NOT CRITICAL when understanding the risk facing companies. This knowledge can be taught. All companies have accounting, human resources, operations, etc. So if you can understand the culture of the company, you will be an effective auditor. Alan says he’s always looking for people who are “smarter” than him. He says that if candidates are “agile thinkers”, they will be successful. He suggests finding people who have an attitude of learning, who are good problem solvers.

Transformation Step 2:

Achieving Acceptance-Looking for candidates who have good communication skills is key. They will have an easier time building relationships. When you build relationships, you will gain a “seat at the table” and this will help you gain more credibility. Great presence and integrity are also important.

Transformation Step 3:

Delivering Value on a Tight Budget-As you deliver good value, you might be granted a larger budget as a result of the management team seeing the value you bring to the organization.

Tactical Internal Audit Steps – Getting what you WANT!

  1. Meet with Key Players-If you are starting an Internal Audit Department or need to re-vamp an existing department, it’s important to meet with the Executive Team to see what their expectations are. You might also need to manage those expectations, if they’re off base. Also be sure to meet with the Audit Committee to determine their hot buttons. Get a feel for the culture and tone at the top of the organization. Sit down with the Audit Team to determine their strengths and weaknesses. Partner with the Management Team so they see you as an advisor.

  2. Over-Communicate-Make the audit reports easy to understand. As auditors know, audits can be very technical, but you need to communicate in plain simple language. This will help you gain acceptance throughout the company. 

  3. Try to Find a Big Win for Internal Audit Early-Alan recommends trying to find a “low hanging fruit” and leverage it to solve an on-going problem to get a big win for Internal Audit. This will build credibility and helps provide a great platform for Internal Audit to move forward. Alan and his team created the basis of an Information Security Council. They did things such as checking people’s desk for confidential info, and reviewing processes. He also created videos that all staff needs to watch annually to help maintain security throughout the company.

  4. Be an Advisor-Go above and beyond Auditing. This can blur the lines between auditing and independence, but is necessary to align Internal Audit with the Management Team.

A Four Decade Career Perspective: What’s the Next Phase?

40 years ago, most audit departments were compliance-based. They were basically there to catch people doing the wrong thing. It was very black and white. Then COSO came into the picture and it was based on controls, which helped things be more process oriented. When Enron hit, SOX took over and auditors were forced to look at things differently. This helped auditors to start to catch problems at the source. Now the best auditors are using Big Data to identify problems before they occur. The other current trend is Globalization. So when things happen in another country, it impacts companies even more because often times the supply chain and other functions happen abroad. Alan suggests that if auditors have an opportunity to work in another country, they should do so in order to make them see things from a new perspective.

How to Keep Staff Motivated-Not One Size Fits All

  1. Hire Good People-First try to hire the best people who are agile thinkers and have a love of learning.
  2. Motivate Individually-Alan’s advice is to manage and motivate people individually. He suggests setting general direction and removing roadblocks.
  3. Challenge Them-Give staff challenges that help them stretch and grow.
  4. Give Credit Where Credit is Due-Give individual credit and make sure Management knows about it. 
  5. Give Feedback-Give positive and well as constructive feedback. Give staff members the tools to be successful.


Need help finding the right staff for your audit department? We invite you then to learn more with our Staffing Resource Analysis or by emailing us at:

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More about Alan Phillips

Listen to Entire Interview

Alan is the Vice President of Internal Audit at The Cheesecake Factory. Prior to joining The Cheesecake Factory, Alan served as a Partner at Ernst and Young for 10 years where he started the firm’s internal audit outsourcing and co-sourcing practice in the Southwest. There, he had the pleasure of serving numerous Global 1000 companies. Alan has worked in Internal Audit field for over 30 years. Alan holds a B.S. in Accounting from the San Diego State and is a CPA and Certified Fraud Examiner and is a speaker for the IIA on Risk Management and SOX.