A long way to go for Internal Audit in South Africa’s private sector.

The New Global Internal Audit Standards and related materials were published on 09 January 2024 to be effective starting 9 January 2025. This significant milestone reminds us of the challenges we still face in this important profession. In the dynamic landscape of professional disciplines, three pillars stand as beacons of excellence: Standards, Certifications, and the Acceptance of the responsibility to act in the public interest. However, in South Africa's private sector internal audit a void exists - a lack of clear commitment to these foundational pillars. In this exploration, we scrutinise the legislative landscape, examining the Companies Act of 2008, King IV Report on Corporate Governance, and the significance of certifications in shaping a robust and responsible internal audit profession.

Legislation and the Missing Link: Companies Act, 2008

The Companies Act of 2008, while comprehensive in various aspects, notably lacks specific provisions addressing internal audit. This omission is a missed opportunity to underscore the importance of internal audit functions in fostering transparency and accountability.

The absence of a clear mandate for internal audit functions, even for specific classifications of companies, reflects a gap in recognising the instrumental role of internal audit in ensuring effective and efficient business operations. Consequently, many impactful companies, ones that significantly influence society, rely solely on external audit reports for their warning signals, bypassing the inherent benefits of a robust internal audit function.

King IV: A Beacon of Guidance in Corporate Governance

While the Companies Act leaves room for improvement, the King IV Report on Corporate Governance provides a crucial framework for internal audit excellence. It stresses the need for governing bodies to approve internal audit charters, defining roles, responsibilities, and authority. Addressing internal audit's role within combined assurance and advocating specific internal audit standards, King IV sets a high bar for corporate governance.

For organisations to truly embrace professionalism in internal audit, there must be a concerted effort to not only comply with King IV recommendations but to integrate these principles into the fabric of their operations. This involves not only meeting the requirements but exceeding them to foster a culture of excellence and accountability.

Certifications: A Catalyst for Competence

In Internal Audit, a discipline where certification is not mandatory, there exists a unique challenge. Professionals from diverse backgrounds, including external audit, may sign off on internal audit reports without holding certifications specific to the discipline. This raises questions about the proficiency and expertise of those entrusted with such critical responsibilities.

Audit committees play a pivotal role in ensuring the efficacy of internal audit functions. To fulfill this responsibility, they must prioritise the appointment of qualified internal audit professionals. Members of the Institutes of Internal Auditors emerge as champions in this arena. These certified professionals undergo rigorous vetting, receive continuous education, and possess access to technical resources, ensuring their adherence to the highest standards.

A Call to Action: Forging a Professional Future

As South Africa's private sector charts its course forward, a collective commitment is needed to fortify the pillars of professionalism in internal audit. Legislation must evolve to underscore the importance of internal audit functions. Certifications should become the standard, ensuring that those entrusted with critical roles possess the necessary expertise.