Internal audit oversight
One of an audit committee’s most important responsibilities is to
oversee the organization’s internal audit function. Here are 10 steps
audit committees can take to facilitate proper oversight and direction
of internal audit:
Evaluate the current and projected scope of internal audit
coverage of risk management and governance. Internal
auditors have increased their focus on risk management and governance
processes, and audit committees have stepped up their interest, too.
Ensure that internal audit’s risk-based plan is flexible and
responsive to change. Amid complex and dynamic
risks, many internal audit groups update their risk assessments and
audit plans more than once a year.
Determine how internal auditors are using
technology. New tools such as data mining are
increasingly used to enhance internal audit’s efficiency and
effectiveness. The audit committee also should be aware of the
specialized skills and budgetary support required by internal audit to
achieve its technology objectives.
Assess the strategic vision and plan for internal
audit. Internal auditors must plan effectively to keep
their internal auditing processes current with new developments,
technology, and skills.
Define how internal audit will provide value to the
organization. Providing assurance is a core and expected
value driver for any internal audit function. Other value can come
from providing high-quality talent to organizations, and providing
monitoring and data-mining capabilities to improve business-unit performance.
Strengthen communications and relationships between internal
audit and the audit committee. Audit committees and
chief audit executives (CAEs) can jointly attend training. Having a
CAE’s direct reports meet periodically with the audit committee chair
and make presentations to the audit committee also can build
relationships and aid in succession planning for the CAE.
Ensure that internal audit’s activities fully comply with
The International Standards for the Professional Practice of
Internal Auditing. The audit committee should
request periodic confirmation that its internal auditors are following
the global standards of the Institute of Internal Auditors (IIA).
Understand the role internal audit plays or could play in
addressing the broader talent needs of the
organization. A measure of internal audit staff quality
is the degree to which the function is seen as a source of talent for
other parts of the organization.
Inquire about the training internal audit is
receiving. Effective training needs to go beyond basic
accounting or auditing skills to address critical areas such as data
mining and analysis, risk management, governance processes,
new-product marketing, and new technological applications. Softer
skills also need to be stressed.
Determine whether internal audit periodically assesses its
skills to identify gaps and address them. Audit
committees need to have a critical discussion about skills with their
internal audit leadership. In posing questions to the CAE and senior
auditors, the audit committee should start with the internal audit
risk assessment, not the audit plan. The central questions should be:
Has internal audit identified all the skills needed to address the
organization’s risk profile, and where does it stand relative to
acquiring the needed skills?
Editor’s note: The topics for this checklist were
derived from findings from the IIA’s 2010
Internal Audit Survey. For more discussion of this topic,
visit the AICPA’s Audit Committee
—By Richard J. Anderson, CPA, (
) clinical professor, DePaul University in Chicago, and J.
Christopher Svare (
), managing director of Partners in Communication LLC, a
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