Strengthening internal audit effectiveness

Abstract

On a routine basis, companies measure and quantify the performance effectiveness of their business activities. In the same manner, internal audit needs to demonstrate its own effectiveness using a performance measurement system tied to the expectations of its key stakeholders. Only by circling back to the needs of its key stakeholders and regularly tracking its performance against the expectations of the board, senior management and operating management, an internal audit function can satisfy for increased scrutiny and more demanding expectation. To achieve this, we recommend balanced scorecards, which go well beyond numbers to examine important, broad-based activities. The balanced scorecard concept, based on the simple premise that measure the action areas described above is management, audit committees and internal auditors- a high-level framework to assess internal audit effectiveness. Unless an organization adopts each measure comprehensively, it runs the risk of having an internal audit function that may fail to meet the new, higher expectations for this key governance activity.

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