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Alignment is key for internal audit to deliver more value

Alignment is key for internal audit to deliver more value

The demands on internal audit have increased significantly in recent
years as technology has advanced, regulation has become more rigorous,
risks have emerged, and companies have sought more business insights
from internal audit teams.

“That bar continues to rise,” FedEx Chief Audit Executive Robert
King, CPA, said Tuesday during a PwC webcast. “And quite candidly, as
you go down that journey and become seen in your organization as more
of a trusted adviser, they continue to raise that bar, because they
ask, ‘What more you can do?’ ”

Senior management at many companies sees internal audit functions
struggling to keep up, according to PwC’s newly released global
survey report
on the state of the internal audit profession.
Although 68% of board members said internal audit provides significant
value, just 45% of senior management respondents agreed.

Some disparity in those numbers is to be expected; board members may
appreciate internal auditors more because they deliver information
that might be new to the audit committee but that management already
is aware of. Nonetheless, King said, there are opportunities for
internal auditors to deliver more value for their organizations.

He said the internal audit function at FedEx, a global parcel
delivery organization based in the United States, has followed a
process to develop additional value for the company in addition to the
traditional assurance function. It’s important, though, that the
quality of internal audit’s assurance deliverables to the audit
committee does not suffer as the function adds value in other areas.

“That’s always number one for us, that they need that control-level
assurance that things are operating as they need to be,” King said.

The keys to adding value beyond controls assurance, King said, are
people, process, communication, and relationships. He said internal
audit functions looking to add more value should:


The relationship portion of the value proposition can be a
tricky one for internal audit, King said, because of expectations of
objectivity and independence. But he said having relationships with
the business units helps internal audit function more effectively
because of a better understanding of strategy and risks.

Open dialogue

Those relationships and a dialogue start with the chief audit
executive and the senior management team, which does not want to be
caught off guard when the internal audit head makes a presentation to
the audit committee, King said. King also encourages staff members to
build relationships with other functions in hopes that employees of
other functions will feel comfortable calling the internal audit team
to ask, for example, about a potential controls concern.

Michelle Hubble, PwC’s internal audit performance improvement leader,
said leading chief audit executives pursue regular dialogue with the
business because it helps them align with the needs of their internal customers.

“More likely than not, [it] starts out as some sort of structured
plan, monthly or quarterly,” Hubble said. “But then it just becomes
part of their culture. And once it becomes part of your culture,
you’ve succeeded on that journey of not just providing basic assurance
services, but providing insight, helping solve problems, and really
focusing on what matters most to management.”

The area of data analytics currently provides an area of excellent
opportunity for internal audit to provide additional value, King said.

“You want to deliver value to your senior management team?” King
said. “Bring in business insight because of data you’ve been able to
manipulate and come to a conclusion to give them insight that they
didn’t have before. Tremendous value. They immediately see you as a
partner, and that’s a win for them.”

It’s a win for the internal audit team, too. Internal audit can
elevate its status in the organization by getting those wins and
building on them, King said. Internal audit functions whose duties are
limited may have difficulty moving to a more value-added role overnight.

But over time, taking advantage of opportunities to add value can
raise the profile of internal audit in the organization. Figuring out
what the business units need—and the skills internal audit needs to
fill those needs—is the first step, King said.

“Align those expectations,” he said. “Where is value to your
organization? They’re asking for more. But in what ways are they
asking for more? Is it just more in the assurance area? Is it more in
the emerging areas that you need to focus on? And do you have those
capabilities? You have to make sure you get alignment on that.”


Ken Tysiac (

ktysiac@aicpa.org
) is a JofA senior editor.

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