Internal audit and board alignment can best be achieved when each looks to understand the priorities and needs of the other.
Having a sound relationship with the board is crucial if internal audit functions are to serve their organizations well and provide effective assurance. Whether chief audit executives (CAEs) report directly to the board or, more likely, to an audit committee, it is vital that the two sides share an informed understanding of internal audit and its role and purpose within the organization. That is why educating the board about the level and nature of assurance internal audit provides is an important part of any CAE’s role.
While that is an easy principle to grasp, achieving it in practice can be a difficult and prolonged journey for both sides. Explaining what internal audit can do and how the function should be positioned in the business is likely to be unhelpful, unless it is done in the context of the board’s reallife needs. “CAEs should be thinking about putting themselves in the shoes of the board members, and understanding what is on their agenda and why,” says Ninette Caruso, CAE at Discover Financial Services in Riverwoods, Ill. Boards are more likely to be concerned with business issues such as profitable growth, dealing with competitors, net profits, and complying with pressing regulatory issues. If internal audit is not engaged in those areas, trying to educate the board about assurance is likely to feel too abstract and disconnected from the business.
An element often missing from such conversations is internal audit's feedback on the effectiveness of the corporate governance framework.
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