Internal Audit and its Bosses Stuck in Value Gap
The primary concern is effectiveness and efficiency
|Friday, March 11, 2016|
By Terry Sheridan, AccountingWeb.com
Audit committee chairs and CFOs are a demanding bunch when it comes to internal audit, and they apparently aren’t getting what they want, according to a new report, Seeking Value through Internal Audit, from KPMG LLP and Forbes.
“The findings call attention to a ‘value gap’ between what audit committee chairs and CFOs identify as priorities and what they are receiving from their internal audit functions,” the report states.
While companies want a measurable impact from internal audit, especially regarding risk and “possible revenue enhancement,” the primary concern is effectiveness and efficiency, the report revealed.
“An effective internal audit function can not only magnify what the company already knows, but present new findings, offer new perspectives, and provide new ways of gleaning such insights,” the report states.
The more than 400 audit committee chairs and CFOs who were surveyed were asked to rank the following factors in internal audit that are most important to them:
And here’s how they ranked the top five skills that internal auditors should possess:
Naturally, this raises the question of value and the oft-mentioned “value add” potential.
“‘Added value’ seems to be the common denominator of desired outcomes in many surveys of this kind, but rarely results in measurable impact,” the report states. “The challenge, therefore, is to make value real.”
To illustrate that, survey respondents were asked: “What insights do companies receive from internal audit today and what would be of most value?” Here are the results:
So if risk assessment and management are the most desired, what do the bosses actually want from internal audit? They want all the bases covered. According to the report, they want a proactive collaboration with compliance, legal, risk management, and other “assurance providers” to deliver what the report calls “combined assurance.” And that makes efficiency and effectiveness even more important.
But does internal audit adequately identify and respond to emerging risks now? The majority (85 percent) of respondents neither agree nor disagree, 10 percent somewhat agree, 5 percent somewhat disagree, and none strongly agree or disagree.