Internal Audit Evaluation

Why It’s Crucial to Evaluate Your Internal Audit Function

In the intricate web of organisational management, the internal audit function stands as a sentinel, guarding against risks, ensuring governance, and fortifying internal controls. However, merely having an internal audit function isn’t enough. To truly harness its potential and guarantee its efficacy, periodic evaluation is paramount. Let’s delve into why it’s high time you evaluated your internal audit function.

The NSW Audit Office, in its recent audit report spanning 25 agencies, underscored the necessity of external evaluation for internal audit functions. Shockingly, 28% of these functions hadn’t undergone such scrutiny. This highlights a critical gap that demands attention. External evaluation, ideally conducted every five years, as per TPP20-08, offers more than just compliance; it’s a strategic imperative.

Here are the compelling reasons why organisations should prioritise the evaluation of their internal audit function:

Assurance of Governance Adherence: External evaluation ensures that governance frameworks align with policy mandates and operate effectively. It serves as a litmus test, affirming that the organisation’s governance practices are not just on paper but are actively upheld.

Optimisation of Audit Plans: An effective audit plan is the cornerstone of risk mitigation. Evaluation helps in ensuring that these plans are not only in place but are also tailored to the organisation’s specific risks and objectives. It’s about aligning audit priorities with strategic goals.

Enhancement of Audit Processes: Evaluation scrutinises the audit planning processes, shedding light on inefficiencies and areas ripe for improvement. It’s akin to fine-tuning a well-oiled machine, ensuring that every component functions seamlessly.

Reflection of Best Practices: Is your internal audit function keeping pace with evolving best practices? Evaluation offers the opportunity to benchmark against industry standards and identify areas where the function can evolve to reflect better practices.

Efficiency and Effectiveness: Perhaps most crucially, evaluation addresses concerns regarding the efficiency and effectiveness of the internal audit function. It’s about optimising resources, streamlining processes, and ultimately enhancing the value proposition of the function.

In essence, evaluating your internal audit function isn’t just a box-ticking exercise; it’s a strategic imperative that can safeguard your organisation against risks, bolster governance, and drive operational excellence.

So, is it time to evaluate your internal audit function? The answer is a resounding yes. In a landscape fraught with complexities and uncertainties, a robust internal audit function isn’t a luxury—it’s a necessity. And by subjecting it to regular evaluation, you’re not just ensuring compliance; you’re empowering it to fulfill its pivotal role as the guardian of organisational integrity and resilience.

Ask our Evaluation Expert, Dana Cross, to assist you with an external evaluation for internal audit functions.

What is an internal audit evaluation?

An internal audit evaluation is a comprehensive assessment of your organisation’s internal functions. It examines the effectiveness, efficiency, and alignment of activities with organisational goals, ensuring compliance.

Why should my organisation conduct an internal audit evaluation?

Regular evaluations help identify areas for improvement, enhance risk management, and ensure that the internal function adds value to your organisation. It’s a proactive approach to strengthening governance and operational effectiveness.

How often should internal audit evaluations be conducted?

The Institute of Internal Auditors recommends conducting an external quality assessment at least once every five years. However, organisations may choose to conduct evaluations more frequently based on their specific needs and risk profiles.

What are the benefits of an internal audit evaluation?

Benefits include improved risk management, enhanced compliance, identification of operational efficiencies, and strengthened stakeholder confidence. It also supports continuous improvement and alignment with best practices.

Who should be involved in the internal audit evaluation process?

Key stakeholders include the Governance team, audit committee members, senior management, or external evaluators. Engaging these parties ensures a comprehensive assessment and alignment with organisational objectives.

What is the difference between internal and external audit evaluations?

Internal audit evaluations focus on assessing the performance and effectiveness of internal functions, while external evaluations provide an independent assessment, often required by standards or regulations.

How does an internal audit evaluation align with risk management?

By evaluating internal functions, organisations can identify gaps in risk coverage, enhance risk mitigation strategies, and ensure that activities effectively address emerging risks.

What methodologies are used in internal audit evaluations?

Methodologies may include self-assessments, peer reviews, and external quality assessments. These approaches are guided by the International Professional Practices Framework and tailored to the organisation’s context.

Can an internal audit evaluation improve organisational performance?

Yes, by identifying inefficiencies, recommending process improvements, and ensuring compliance, internal audit evaluations contribute to enhanced operational performance and strategic alignment.

How can TargetedBrains assist with internal audit evaluations?

TargetedBrains offers tailored internal audit evaluation services, leveraging industry expertise to assess and enhance your organisation. Our approach ensures alignment with best practices and organisational objectives.