Measuring the Effectiveness, of the Internal Audit Function Practical tools for internal auditors

The requirements placed on the Internal Audit function (IAF) by internal and external stakeholders seem to be constantly increasing. As a result of the financial crisis, new laws and regulations have been introduced in the financial sector and supervisory bodies have tightened up and expanded their supervision. In addition, increasing critical attention is paid in the public domain to the design and operating effectiveness of companies’ governance and their reporting of non-financial information. As the IAF plays an important role in the governance framework, there has been a corresponding increase in the requirements placed on the IAF. Various stakeholders quite regularly publish interesting documents that introduce additional requirements regarding the quality of the IAF.

Recently, the Monitoring Committee for the Dutch Corporate Governance Code presented its proposals for revising this Code. These proposals envisage a prominent position for the IAF, which is considered “complementary to the external auditor.” According to the Monitoring Committee: “It is important to have a good interplay between the Executive Board, the Supervisory Board and the Audit Committee, as well as a good communication with the internal audit function and the external auditor.” An important element in the proposals in relation to the effectiveness of the IAF is also included in guidance 1.5.1, which states that the Audit Committee should supervise “the relationship with - and compliance with the recommendations of and followup given to comments of - the internal auditor and external auditor”.