CBOK 2010 Report III: Measuring Internal Auditing's Value

Report III of the Common Body of Knowledge (CBOK) study focuses on measuring the value of internal auditing under dynamic business conditions and the key factors contributing to the value delivered by an internal audit activity. The value can be viewed from the perspectives of internal auditors/internal audit service providers, customers (such as the board, audit committee, senior management) and other stakeholders. This report covers the perceived value of internal audit activities by internal auditors/internal audit service providers. To understand the linkage between the performance of an internal audit activity and its perceived contribution (value), this report addresses 1) the relationship between organizational characteristics and the perceived contribution of an internal audit activity; 2) the effect of an internal audit activity’s characteristics on its perceived contribution; 3) the effect of internal audit activity performance measurement methods on its perceived contribution; and 4) the relationship between the services performed by an internal audit activity and its perceived contribution.

An analysis of the survey responses revealed the following key findings:
  • Most respondents believe that their internal audit activities add value to their organizations. Both independence and objectivity are viewed as key factors for internal audit activities to add value.
  • While most respondents view their internal audit activity as contributing to controls, they do not to the same extent perceive it as contributing to risk management or governance.
  • The results from regional comparisons indicate that there are significant differences across the seven regions in terms of the perceived contribution of internal audit activities to organizations.

The most important factors to the perceived contribution of the internal audit activity are 1) having appropriate access to the audit committee; 2) functioning without coercion to change a rating assessment or withdraw a finding; and 3) more audit tools or technology used on a typical audit engagement.

  • Compared to 2006, there appears to be a declining trend in sourcing the internal audit activity from outside the organization. The percentage of co-sourcing or outsourcing of the activity has an impact on its perceived effectiveness, measured in terms of process effectiveness, effective functioning, and sufficient organization status, rather than on the perception of the value added.
  • The internal audit activity performance methods most frequently used include 1) assessment by percentage of the audit plan completed; 2) acceptance and implementation of recommendations; 3) surveys/feedback from the board/audit committee/senior management; 4) customer/auditee surveys from audited departments; 5) assurance of sound risk management; and 6) reliance by external auditors on the internal audit activity.
  • The balanced scorecard and assurance of sound risk management/internal control methods are expected to gain importance as internal audit activity performance methods in the coming years.

This report provides insight to direct internal audit activities in delivering value to the organization to meet stakeholder expectations.

Members IIA Netherlands can find the full report here.

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