Enhancing the strategic value of Internal Audit | KPMG | BE

Enhancing the strategic value of Internal Audit

Enhancing the strategic value of Internal Audit

Executive stakeholders are finding that Internal Audit can, and should, add strategic value in addition to raising compliance standards. It is up to the Internal Auditors to take the initiative and broaden their responsibilities to enhance their strategic value to the organization.

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KPMG in Belgium

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When respondents were questioned whether IA is a strategic or a support function, almost all Chief Financial Officers and Audit Committee Chairmen (99%) envisage a strategic role for Internal Auditors compared with only 60% of the auditors themselves.

This is the main finding based on a comparison of two separate surveys, each soliciting responses from different sets of companies around the world. The first survey was administered with 405 CFOs and Audit Committee chairmen. The second collected 134 responses from Internal Auditors.

When it comes to strategic planning, less than half of the Internal auditors said they were involved in the strategic planning process, whereas 94 percent of the executive stakeholder respondents said Internal Auditors were involved.
In addition, respondents were asked to describe “an insightful and valuable internal audit”.  The Internal Auditors took a more general view, with 85 percent (by far the highest number) saying an internal audit, by definition, examines efficiency and effectiveness. The most prevalent response among executive stakeholders was more specific, with 82 percent saying a valuable audit is one that finds potential revenue enhancement, cost savings and/or smarter capital expenditures. This would suggest that executive stakeholders view “value” in more tangible terms.

In the case of these surveys, there is a consistent disparity in the views of the two groups regarding the strategic role of IA. However, both sides agree that communication talents are important. This is significant: for Internal Auditors to play a more important role, they must become more influential. This contemporary gap can be bridged starting with the following steps:

  • Internal auditors must become more deeply involved in business matters, and not just in dealing with questions about processes, controls and compliance. They need to understand not only the risks of a course of action, but also the opportunities the business is seeking to capitalize on.
  • Internal Auditors need to do more to leverage technology, not just to help increase efficiency but also to improve the quality and depth of the insights being delivered to the business. IA must position itself at the point where risk and opportunity intersect.
  • Internal Auditors need to view their activities through the lens of business value. Both IA and business at every level will learn from each other, so that business leaders have a keener understanding of risk, and audit executives more deeply appreciate the upside of risk.

Return to the Risk + Newsletter October 2017

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