Internal audit to seize opportunities to enhance its relevancy

The effects of the global economic crisis placed strategic risk management as a priority for business leaders as many consumer-oriented companies continue to face significant challenges. A new survey from PricewaterhouseCoopers (PwC) suggests that internal audit has the right company-wide visibility and mandate to serve as strategic risk advisers to boards.

PwC’s 2010 Global State of the Internal Audit Profession Survey interviewed more than 2,000 executives from 55 countries. The results of the survey show that to remain relevant and meet increasing stakeholder demands, internal audit functions must evolve to an enhanced “Internal Audit 2.0” state that provides business leaders with actionable business risk intelligence.

Anton van Wyk, PwC’s Risk Advisory Services Leader says, “Many have blamed the crises on the failure of adequate risk management and the relevance of this survey is supported by international governments making regulatory changes to improve risk management.”

The reputation of the financial services and automotive industries were hardest hit and these industries are focusing on initiatives to realise cost efficiencies, develop talent, grow organically and implement new information technology. In addition, CEOs across all industries are looking to upgrade their enterprise-wide risk management capability to better prepare for success in what is likely to be a very challenging business environment.

The study identifies three critical focus areas for internal audit departments:

• Critical risks and issues
• Aligning internal audit's value position with its stakeholders’ expectations
• Matching the staffing model with that value proposition.

Senior executives must acknowledge that Internal Audit must employ highly experienced and skilled professionals who can accurately identify areas of improvement, synthesise a large amount of data, use technology more effectively and assist the organisation to be more successful, if the audit team is to assume the role of strategic partner.

Van Wyk continues, “The survey conducted had four main purposes, to capture a snapshot of the internal audit profession, share PwC insights related to major issues, trends and changes, collect benchmarking data to help organisations with Internal Audit processes and provide a baseline to measure ongoing alterations in the profession.”

With these new challenges in mind, Internal Audit must take a more radical approach to change than it has in the past, and rethink and redefine the way it works.

The survey outlines several important steps that should be taken:

• Start with a plan
• Rethink risk assessment practices
• Fill the skills and capabilities gap
• Align with other assurance functions
• Focus on obtaining return on investment (ROI) from technology.

As Internal Audit confronts new and rapidly evolving needs and expectations, it must take a proactive initiative to redefine its role. That means expanding its skill sets and preparing to take a leadership role as a more powerful resource for senior executives, directors and boards in aligning strategy and risk identification, control and mitigation.