​Is Internal Audit Meeting the Challenge? Perhaps Not!

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EY has just released an important study on Internal Audit's Evolving Role. I strongly recommend a careful read, then separate discussions with your top executives and audit committee members.

Before getting into the substance, it is critical to understand who were surveyed. This was not a typical survey of CAEs or audit committee members. The survey (by Forbes Insight) obtained feedback from:

  • CEOs (40%).
  • Chief financial officers (27%).
  • Audit committee chairs (17%).
  • Audit committee members (16%).

Executives and audit committee members typically have different expectations of internal audit. As the function reports to the latter, I suggest that the report be read carefully and validated with your primary stakeholders before confirming that the conclusions are appropriate and applicable to your organization.

Here are the key findings:

  1. 96 percent believe that internal audit has an important part to play in the management of risk.
  2. But, 74 percent believe there a need for short-term improvement.
  3. And, only 37 percent involve internal audit in business decisions and strategy.

Frankly, the last one does not worry me much. Internal audit should be independent of management, so I am surprised that as many as 37 percent involve internal audit in making decisions or setting strategy.

Yet, the premise of the EY paper is that internal audit should have a role as "strategic advisor"!

Do you agree? Or do you join me in saying that we should:

  1. Provide assurance on the effectiveness of governance processes, risk management, and the related controls.
  2. Contribute through our audit recommendations and consulting services to the improvement of the above.
  3. Be a leader and advocate for change and improvement in each of these areas?



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