Developing a Future-Focused Internal Audit Strategy

What is an Internal Audit Strategy?

• “Internal Audit Strategy” is defined as the approach that establishes internal audit as a critical change agent, driving appropriate internal audit services to meet the needs of today and tomorrow – inspired by contemporary practice and stakeholder expectations.
• Unlike an internal audit plan outlining scheduled audits, an internal audit strategy focuses on basic building blocks and enduring aspirations for benefiting services and performance.

Key Elements

Internal Audit Plan vs. Internal Audit Strategy

• The internal audit plan is a document assigning specific audits based on risk assessments and assurance mapping.
• Internal Audit Strategy – A higher-level view of the strategic vision, goals, and objectives of internal audit either uses inputs generated by or should feed directly into one or more plans (i.e., details how internal audit considers aligning with longer-term organizational objectives).

Global Internal Audit Standards (GIAS)

• GIAS – Standard 9.2: The Chief Audit Executive (CAE) must develop and maintain a dynamic schedule for his or her activities driven by organizational risks to achieve aims and objectives.

Internal Audit Strategy Components

• Vision: Establishes where the internal audit function aims to be in the next three to five years.
• Strategic Objectives: Specific, measurable goals that guide internal audit activities.
• Supporting Initiatives: Actions and plans to achieve strategic objectives.

Internal Audit Strategy Outcomes

• Ensures a roadmap for continuous Improvement.
• Improves alignment with what the organization is trying to achieve.
• Encourages the full engagement and satisfaction of stakeholders.
• Encourages the acquisition of essential life skills and assets.

Case Study: XYZ Company

Background

A pioneering company in big data, digital solutions, and transformation, which has made key shifts to remain a frontrunner in technology and innovation. The XYZ internal audit function contains 5 staff. In certain cases, external service providers are utilized for an engagement of a specialized nature.

Challenge

XYZ’s keen focus is on working with dynamic strategy and its associated risks, causing a need to drive internal auditing towards providing relevant assurance and advice services to manage such risk.

Development of Internal Audit Strategy

1- Develop a Vision and Mission

• Establishing the Vision: Developed in consultation with the audit committee and senior management, reflecting the desired future state of internal audit.
• Vision: To be a trusted advisor and key agent of change.
• Mission: Enhance and protect value through risk-based, objective assurance, advice, and insights.

2- Principles Guiding the Strategy

Organization Scan

• Assess the organization’s obligations to provide assurance.
• Understand the expectations of the governing authority and the audit committee.
• Define the internal audit strategic vision.

Internal Audit Good Practice Scan

• Identify successful practices from other internal audit functions that might be suitable.
• Utilize resources like the IIA-Australia Factsheet ‘Value-Based Internal Audit’ for guidance, IIA-Australia White Paper - Internal Audit Strategy – A Case Study & IIA - Practice Guide - Developing the Internal Audit Strategic Plan.

Research and Industry Environmental Scan

• Identify current and predicted risks and issues from industry research.
• Engage with industry peers to gather relevant information.

Stakeholder Feedback

• Gather insights from stakeholders to understand their concerns and expectations.
• Use formal stakeholder relationship management and feedback surveys to capture needs.

Foundational Process Improvements

• Conduct internal and external assessments against Internal Audit Standards.
• Implement foundational improvements to ensure the basics are correct.

What’s Working and What’s Not Working?

• Evaluate the internal audit function to identify strengths and areas for improvement.
• Address gaps between the current state and the desired future state.

Future Work Profile

• Define what the future internal audit function will look like.
• Consider innovative approaches and new profiles for internal audit work.

Develop an Internal Audit Strategy

• Develop a comprehensive strategy to deliver leading internal audit services.
• Ensure the strategy aligns with the internal audit vision and stakeholder expectations.
• Include a high-level roadmap and action plan for service enhancement and operational improvements.

Define the Benefits

• Clearly articulate the benefits of the internal audit strategy for the organization.
• Establish performance criteria to measure the success of the strategy.

This structured approach ensures that the internal audit strategy is comprehensive, aligned with organizational goals, and capable of delivering value-adding services.

Conclusion

Developing an internal audit strategy is crucial for adapting to organizational changes and ensuring the internal audit function remains relevant and effective.

Internal audits can significantly contribute to building a better organization by aligning with organizational goals, engaging stakeholders, and continuously improving processes.

The XYZ case study highlights the practical steps and benefits of implementing a robust internal audit strategy, demonstrating the importance of strategic planning in internal audit functions.

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