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?
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