Four steps to formalise internal audits strategic impact

Fauzan Wahyuabdi

Source
http://www.cgma.org/Magazine/News/Pages/20126134.as px?cm_mmc=CGMANL-_-10Aug12-_-TopNews-_InternalAudit&utm_source=cgmanl&utm_medium=10Aug1 2&utm_term=topnews&utm_content=InternalAudit&utm_c ampaign=cgmanl August, 13th, 2012

Roles of Internal Audit

Internal audit isnt just about compliance anymore singly, the functions role is being incorporated into the broader business strategy
from mulling over major capital projects to advising on mergers and acquisitions

Executives say : they need to do a better job of formally describing the role internal auditors will play in charting the course of the business.

Result of EYs Survey

Three-quarters of executives surveyed by Ernst & Young said strong risk management has a positive impact on their long-term earnings performance. internal auditors play a key part: An equal percentage said their internal audit function has a positive impact on their risk management efforts, according to the report, The Future of Internal Audit is Now, which polled 695 chief auditors and other C-suite executives 61% said they had no documented mandate aligning internal audit with the organisational strategy

The Paradigm and Future of Internal Audit

Brian Schwartz, Ernst & Youngs internal audit leader in the Americas:
The paradigm for internal audits role is shifting to a more holistic role, encompassing compliance, operational and strategic advising Todays internal audit function must be aligned to the organisations strategic initiatives to be relevant It is imperative that audit functions revisit their respective mandates and adjust their focus to include coverage of strategic and operational business risks, and not only financial compliance

The Recomendation
The report recommends a four-step process for executives to follow in creating a formal strategy document for the internal audit function
1. 2. 3. 4. Develop and refine internal audits strategic vision Identify and prioritise key strategic initiatives Design key performance indicators Develop an operating strategy

1st Step: Develop and refine internal audits strategic vision

Incorporate the needs of key stakeholders plus the roles and responsibilities of internal audit into a plan for what internal audit should accomplish over a long period.

2nd Step: Identify and prioritise key strategic initiatives

Align initiatives to key business risks and key operational and functional priorities Make sure internal audit has the staff, tools, processes and functional insights necessary to accomplish the objectives.

3rd Step: Design key performance indicators

Determine metrics that will measure how internal audit fares in meeting its initiatives aligning with stakeholder expectations and producing desired results

4th Step: Develop an operating strategy

Describe activities that will help internal audit accomplish its objectives Determine key milestones and how the function will communicate its progress to key stakeholders Create a mechanism for internal audit to adapt to changing priorities so it can remain relevant

Strategic Planning of Internal Audit Function

The strategic plan can help internal audit develop and retain a key role in charting a successful path for an organisation Building a relationship of mutual trust with management also is critical in maximising internal audits relevance to stakeholders Internal audit functions can develop a relationship map that identifies key stakeholders and assigns specific internal audit leaders to own those relationships and interact with those stakeholders on a recurring basis includes formal meetings to discuss upcoming audits and casual contact to discuss changes to business objectives

Strategic Planning of Internal Audit Function

The strategic plan can help internal audit develop and retain a key role in charting a successful path for an organisation Building a relationship of mutual trust with management also is critical in maximising internal audits relevance to stakeholders Internal audit functions can develop a relationship map that identifies key stakeholders and assigns specific internal audit leaders to own those relationships and interact with those stakeholders on a recurring basis includes formal meetings to discuss upcoming audits and casual contact to discuss changes to business objectives