Of all respondents, 39% work for small IAFs (1-5 fte), while 61% owork for large IAFs. Overall, smaller IAFs have lower achieved ambition levels than larger IAFs. Based on the ambition levels of the small IAFs, the respondents want to provide more services on the topics of Governance and Risk Management, Strategy and Soft Controls. On average, the larger IAFs also have the ambition to enlarge their audit services, but except for Soft Controls, this ambition is still in line with the average achieved level.
1.5 Other remarks
According to the definition of internal auditing, internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. This definition explicitly includes consulting activity in the IAF. Only 4 out of 36 respondents stated they perform advisory services in line with the IPPF. This differs from what was expected. While setting up the IA AM, it was acknowledged that in the Dutch context, advisory services are not always provided. Possibly the terminology for advisory services has been used in two different ways when completing the survey. Either consulting as defined in the IPPF Standards or as the natural advisory duty of the IAF. But this needs further research.
The first notable observation is the difference between IAFs working within financial services versus the IAFs not working within financial services.
For the sub theme Audit Plan, these differences apply to all topics. The organization’s enterprise risk management strategies, risk appetite and strategy process are more often included in the audit universe of FS IAFs compared to their peers in non-FS. Also, the audit committee or a similar committee is more likely to be involved in the priority setting than for the non-FS peers. It was expected this difference could be explained by the size of the departments, but this was not the case, as the small IAFs (1-5 fte) were spread evenly over financial and non-financial services.
For the sub theme Quality Assurance, the main differences are the fact that within FS more use is made of automated practice management tool and that the IAF’s audit and rating methodology are aligned with the company’s risk appetite. The latter could be explained because of the regulation on the financial services sector there has been more focus (and reporting on) the risk appetite.
2.4 Small Audit Shops versus large IAFs
Also, all scores between Small Audit Shops and the larger IAFs differ significantly. Most interesting differences relate audit universe (based on risk analysis by the IAF versus business’ strategic objectives respectively); resource planning (based on the audit plan versus a gap analysis based on future needs) and the audit manual (paper versus electronic filing).
When comparing between participants’ groups, there are no significant differences between FS and non-FS. When we make a deep dive into the results, they show that Financials have already reached a higher average level then the non-Financials. Overall, the ambition of Financials is higher than of the non-financials.
3.4 Small Audit Shops versus large IAFs
When comparing between the participants’ groups, there are 7 of 14 larger IAFs which have already achieved the maximum score Optimized. This indicates these IAFs facilitate and support top leaders of the IA activity becoming key leaders within relevant bodies. They stimulate participating in the administration and/or leadership of professional bodies. Smaller IAFs have a significantly lower achieved and ambitioned levels.
Both on the sub topics ‘approval’ and ‘audience’, non-FS IAF’s have a lower achieved level (integrated) than their FS counterparts (managed). This indicates that within financial services, business management has a more facilitating role for the IAF to align business plan and needs with the business objectives compared with non-financial services. Also, the recipients of the IAF’s performance report within the financial services are more likely to include the full supervisory board instead of only the audit committee. Based on the average achieved level, both sectors do not have the optimized level ambition where management challenges/encourages the IAF to be a self-learning organization. Both sectors have the ambition level to use performing measures that are a combination of quantitative a qualitative measures on multiple dimensions, but the FS already achieved this level, where the non-FS seem to have a gap to bridge.
4.4 Other remarks
- The small IAF’s that do not perform financial audits have a higher ambition level for performance measures than the small IAF’s that do not perform financial audits.
- The IAFs not performing financial audits have the ambition to report their performance on a combination of quantitative and qualitative measures on multiple dimensions, while the IAF’s that do perform financial audits focus more on that the performance measures are mainly quantitative and focused on basic efficiency and effectiveness metrics. This difference is only significant for the smaller IAFs when taking the dimension financial audit into account.
- Another noteworthy observation relates to the topic Audience. Based on input received, it becomes clear that the essential activities for the ambition level ‘Optimized’ are not recognized as there is no ambition for the participants to report their performance externally.
When comparing between participants’ groups there are no significant differences between FS and non-FS.
5.4 Small Audit Shops versus large IAFs
Smaller IAFs (1-5 fte) have a bigger challenge to advise and influence top-level management compared to larger IAFs. The small audit shops will have a CAE that regularly communicates and interacts directly with management, whereas for big IAFs, the CAE participates and contributes as part of the management team advising on emerging business and strategic issues.
5.5 Other remarks
The IA AM Taskforce had multiple questions concerning the collaboration with the external accountant. The IA AM shows the steps in progressing to the next ambition level; levels cannot be skipped. Sometimes the external accountant or the organization makes the decision not to have the external accountant to rely on the work of the IAF and to use it for his own work. Maybe this is an activity that we need to consider not to be a bottleneck to precede to the next level. This needs to be taken into account when evaluating the IA AM in 2018.
On average, the levels achieved and ambition level of the IAFs in FS are higher than for non-FS. Diving into this, there are two significant differences. Within FS the IAF charter is in more cases aligned (or referred to) in the ARC charter. Next, the three lines of defense model seems to be more incorporated within FS compared to non-FS.
6.4 Small Audit Shops versus large IAFs
Although the smaller and larger IAFs are relatively equally divided between the non-FS and FS IAFs, the differences between the smaller and larger IAFs are similar as those between FS and non-FS.