Internal Audit Function Assessment

Building on our theme of enhancing the quality of Internal Audit function, it is important to highlight the positive impact of external quality assessment process.

The internal audit function is crucial for organizational governance and risk management in today's complex business environment. Periodic evaluations are essential to ensure its effectiveness, adherence to professional standards, and credibility with stakeholders. This article explores two key pathways for external quality assessment: Internal Audit External Assessment and Self-Assessment with Independent Validation.

Internal auditing is an independent and objective assurance and consulting activity designed to add value and improve an organization's operations. It provides assurance on risk management, control, and governance processes. Internal auditors objectively review systems and processes, identify inefficiencies, assess risks, investigate fraud, and ensure compliance. A high-performing internal audit team acts as a trusted business partner, contributing to the achievement of organizational goals and fostering continuous improvement. Effective internal auditing helps organizations identify risks, uncover inefficiencies, implement corrective actions, and promote a culture of improvement.

A formal external assessment is a rigorous evaluation of the internal audit function conducted by independent professionals from outside the organization. IIA-The Institute of Internal Auditors mandates this at least once every five years to ensure conformance with the Standards. The assessment evaluates compliance with the IIA's mandatory guidance, including the Definition of Internal Auditing, Code of Ethics, and the Standards. It also assesses operational efficiency and effectiveness to identify improvement opportunities. The process involves planning, selecting an independent assessment team, reviewing planning documents, conducting interviews with stakeholders, and performing on-site work to review audits, reports, and policies. The team evaluates conformance with standards and ethics, considering quality improvement initiatives. The final phase involves evaluating gathered information, summarizing issues, formulating recommendations, and issuing a comprehensive report with the Chief Audit Executive / Head of Audit's response and action plan.

Benefits include an unbiased perspective, bench-marking against best practices, identification of improvement opportunities, and enhanced credibility with stakeholders.

Self-assessment with independent validation (SAIV) is an alternative pathway where the internal audit activity conducts a self-assessment, followed by validation by an independent external assessor. The goal is similar to a full external assessment: to evaluate conformance with the IIA's mandatory guidance and identify areas for improvement. The process begins with defining the assessment scope in consultation with the audit committee and senior management. A strong Quality Assurance and Improvement Program(QAIP) is crucial for SAIV. The internal audit activity plans, schedules, and staffs the self-assessment, selecting a qualified and independent external assessor. Close communication with the external assessor is vital throughout the process, including agreeing on surveys and interviews. The internal audit team prepares planning guides, conducts surveys, executes assessment programs, summarizes findings, and prepares a report for the external assessor. During the on-site visit, the external assessor reviews documentation, tests the self-assessment, and interviews stakeholders to validate the results. The external assessor provides a formal opinion confirming the self-assessment or noting disagreements. The final report is signed by both the internal team and the external assessor and issued to senior management and the board. Benefits of SAIV include cost-effectiveness, valuable training for the internal audit team, transparent information sharing, and enhanced credibility due to independent validation.

Both external assessments and SAIV are crucial for elevating the quality of the internal audit function. They ensure adherence to professional standards and contribute measurable value to the organization. These evaluations validate compliance with the IIA's guidance and drive continuous improvement by identifying areas for enhancement. The involvement of external parties provides an unbiased perspective, uncovering opportunities and blind spots. Evaluation services ensure alignment with organizational priorities and stakeholder expectations, fostering a risk-based approach. They also assess the use of technology and data analytics, adherence to methodology, and progress towards QAIP objectives. Bench-marking against best practices allows for the identification of improvement opportunities and strengthens the QAIP.

Credibility is paramount for internal audit, as stakeholders rely on its assurance and recommendations. Internal audit assessment is crucial for establishing and maintaining this credibility. By undergoing evaluation, internal audit functions demonstrate a commitment to quality and continuous improvement, building stakeholder confidence in their effectiveness and objectivity. The assessment process validates conformance with the IIA's professional standards and the Code of Ethics, providing assurance to stakeholders. The involvement of external parties offers an unbiased view, identifying blind spots and improvement opportunities. Ultimately, assessment ensures the function remains relevant and a trusted resource.

In today's complex business environment, a robust and credible internal audit function is essential for effective governance and risk management. Investing in professional internal audit evaluation services, whether through a rigorous external assessment or a validated self-assessment, guarantees the highest standards of quality and effectiveness. Independent validation against global benchmarks enhances credibility and builds trust with stakeholders. Expert assessors provide thorough evaluations and actionable recommendations for continuous improvement. Tailored solutions are available to meet specific organizational needs and resources. Investing in expert evaluation fortifies the internal audit function, enhances its impact, and ensures sustained organizational success. Contact us for a confidential consultation to discover how our evaluation services can empower your internal audit function.

Internal audit evaluation services are indispensable for ensuring the quality, effectiveness, and credibility of the internal audit function. In an era of increasing demands for trust and transparency, these evaluations provide critical assurance to stakeholders. By committing to continuous improvement and undergoing periodic scrutiny, internal audit functions become trusted advisors and strategic partners. Investing in these services is a strategic imperative for ensuring a future of trust, value, and sustained excellence in internal auditing.