Internal Audit Function

ternallIs your internal audit function effective?

Introduction The recently revised Combined Code suggests that Audit Committees should review and monitor the effectiveness of their organisation’s Internal Audit function. The ICAEW has recently issued a publication (I was a member of the working party that wrote this document) entitled ‘Evaluating the Effectiveness of your Internal Audit function’. In the same way that Internal Audit carry out reviews on different parts of the organisation for whom they work, it is right that they should also be reviewed on a regular basis. Yet we seem to have confusion about what should be included as part of such a review and, indeed, about basic issues such as the role of Internal Audit and who are their primary customers. Adding value vs measuring performance There is much talk within the Internal Audit community about ‘adding value’ and ‘measuring performance’ and I have already written a couple of articles covering these areas. Many people seem to think that they are the same thing but the purpose of this article is to demonstrate that this is not the case. This article aims to look at why ‘adding value’ should not be seen to be a core role of Internal Audit. The role of Internal Audit has developed and changed over the last decade. It has moved from being a compliance or ‘policeman’ role, through to more of a consultancy role and is now, I suggest, struggling to understand the role that it should be playing. In January 2003, Cynthia Cooper and her Internal Audit team at WorldCom were being heralded as full of integrity for the role they played in uncovering the extent of the issues at WorldCom. Indeed Ms Cooper was jointly awarded the Time Magazine ‘person of the year award’ for the role that she and her team played. Interestingly, the other two recipients of the award could also be described as whistleblowers. Why then in the summer of this year was Ms Cooper and her team so vilified when the Bankruptcy Court of New York...