In an uncertain and challenging economy, organizations are seeking an approach to internal audit that goes beyond reviewing past activities. Instead, they want internal audits to be insightful, forward looking, and go beyond preserving current structure to creating value on a departmental, divisional, or organization-wide level.
The Need to Evolve Internal Audit
Accelerated changes in response to challenging economic and competitive market conditions have redefined the organizational structures, business processes, and, ultimately, the associated risks of companies.
KPMG has released a thought leadership paper designed to investigate the evolving need of internal audit (IA) in this changing environment and how it can support and drive the value creation. It highlights how critical thinking can be applied to the IA-function and what strategy the IA-function should use in order to drive higher value from the assurance and advisory work it provides to the organization.
Since IA functions have always closely observed the organizational transformations across multiple global functions within their companies it has created a unique opportunity for IA to focus their agenda beyond the traditional focus on financial- and compliance-related risks.
The Drive Towards Value Creation
In order to meet these challenges and stay aligned with the stakeholder expectations IA needs to redesign and re-structure its processes, competencies and capabilities. While maintaining the needed objectivity and independence the IA-function has to achieve a close relationship to the business to facilitate an in-depth understanding of the business and thus advise on possible gaps in the efficiency and effectiveness of the corporate governance framework and thus provide added value. As a consequence this also impact the skill sets needed by the IA-function in order to address the evolving risk profile of the company.
Because new business risks rapidly emerge and organizational changes are of constant nature the IA-function must be prepared to continuously question its strategic audit plan and adjusted it accordingly. In a critical thinking environment, the traditional audit cycle of planning, fieldwork, completion, reporting, and follow-up needs to be enhanced by adding additional stages focusing on strategic alignment and key business drivers.
Critical thinking should be leveraged as a core approach for internal audit to establish itself as a strategic partner within the business, focused on achieving balance between risk management/assurance and business performance.