Businesses taking too much risk with internal audits
3 min read
24 September 2015
Despite internal audits being vital for all businesses, a quarter of firms are failing to conform with international risk assessment standards.
A new report from the Chartered Institute of Internal Auditors said that 25 per cent of firms and public sector organisations assessed by the institute in benchmarking reviews in the last year had difficulty meeting the international standards set out by the Global Institute of Internal Auditors.
As a result, boards will not be getting an “adequate overview of the effectiveness of their organisation’s risk management processes,” it said.
The institute said that the role of internal audit is to provide independent assurance that an organisation’s risk management, governance and internal control processes are operating effectually.
It welcomed the fact that three-quarters of organisations assessed achieved high or good levels of compliance. It was suggested, however, that the areas where improvement was needed included – developing qualitative as well as quantitative measures of how effective the organisation’s risk controls are, developing quality assurance plans that focus resources properly on the most important risks faced, communicating more effectively with the board about the approach of the internal audit team and being able to provide a view on risk controls at an earlier point in their implementation.
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Ian Peters, CEO of the Chartered Institute of Internal Auditors, said: “Many companies have seen a substantial improvement in terms of how well risk assurance systems work over the last few years – heightened interest in governance, risk management and control since the financial crisis has helped to raise the profile of Internal Audit.
“The remaining quarter should now consider how they can raise standards and ensure that their Internal Audit function is fully fit for purpose. It’s critical that internal audit gets the support right from the top of the organisation which it needs to do its job effectively. The insight gained through our benchmarking research should provide a vital tool in helping businesses and other bodies to identify areas for improvement and devise action plans to raise performance.”
Organisations scored highly on the skills and competencies of internal auditors to meet specific requirements, with 92 per cent meeting standards governing proficiency and professional care.