Trends and challenges
The internal audit department is a key pillar in an organisation’s structure. Corporate wrongdoing and risk failures have again served to highlight the critical role that internal audit plays and have shone the spotlight squarely on internal audit to step up and deliver on increasing expectations.
Traditionally, the internal audit function focused on providing core assurance around business process risk and controls. But, with increasing market volatility and complexity, internal audit is being asked to deliver deeper insights and value beyond assurance, particularly in the areas of strategy execution, emerging risk, and
increasing the use of analytics. Delivering on these new and increased expectations presents many challenges for internal audit departments today.
An ongoing challenge for internal audit relates to multiple stakeholder expectations which, at times, may differ. It is generally considered that, to ensure the independence of the function, internal audit should report functionally to the Audit Committee of the Board of Directors. Audit Committees, however, have a very clear fiduciary and governance responsibility with respect to value preservation and ensuring that principal business risks are effectively managed across the organisation.
These responsibilities translate directly into an expectation that internal audit provide assurance to the Audit Committee (and more broadly to the Board of Directors) that key risks are identified and managed effectively. Without question, this independent assurance role is a basic expectation for all internal audit departments and is at the core of internal audit’s mandate. Other stakeholders, including regulatory bodies for regulated entities, have similar expectations of internal audit. Management, as one key stakeholder, looks to internal audit for similar assurances; however, increasingly, management expectations extend beyond this core assurance role in search of greater value — in effect, a greater return for the organisation’s internal audit investment. As context for this expanded expectation, one needs to look no further than what is transpiring in many organisations today—a laser focus on creating shareholder value in an uncertain and often challenging business climate.
Inside magazine issue 3, February 2014
Inside is Deloitte’s quarterly magazine offering an exclusive insight into best practices, trends and opportunities faced by our clients across all industries.
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