Positioning internal audit as a strategic business partner: A Lever for Driving Organisational Excellence
Amid the constantly evolving business landscape, organisations are on a relentless quest to outperform their competition and secure sustainable growth.
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To do so, they must make strategic decisions, manage risks effectively, and constantly improve their processes. One ally in this mission, often underestimated, is the Internal Audit function.
Far from being just a regulatory requirement or a necessary 'evil,' Internal Audit can play a vital role as a strategic business partner, aiding organisations in achieving excellence.
This article explores how organisations can leverage Internal Audit for strategic advantage and foster organisational excellence.
The evolution of internal audit
Traditionally, the Internal Audit function has been associated with reviewing financial statements, ensuring regulatory compliance, and testing internal controls.
However, the contemporary business environment demands more from Internal Audit. In addition to safeguarding assets and ensuring compliance, Internal Audit is now expected to provide strategic insights, advisory services, and contribute to value creation.
Internal audit as a strategic business partner
The International Professional Practices Framework (IPPF) from the Institute of Internal Auditors (IIA) articulates that the role of Internal Audit should extend beyond assurance services to include consulting services.
By doing so, Internal Audit transforms from a 'policing' function into a strategic business partner. This is how this transition materialises:
1. Risk management: In today's risk-ridden business environment, the role of Internal Audit in risk management is pivotal. As a strategic partner, Internal Audit not only identifies and assesses risks but also aligns them with strategic objectives. By providing insights into how risks could impact the strategy, it enables organizations to manage risk proactively and make better strategic decisions.
2. Operational efficiency: As part of their engagements, internal auditors delve into the depth of business processes. They can identify bottlenecks, inefficiencies, and areas of improvement. By recommending measures to streamline processes, reduce waste, and improve productivity, Internal Audit contributes directly to operational efficiency and performance.
3. Strategic insights: With their cross-functional view of the organisation, internal auditors have a unique perspective on how different parts of the organisation function and interrelate. They can use this vantage point to provide insights that can inform strategy formulation and execution, making them invaluable strategic partners.
4. Governance and control: Good governance is a prerequisite for any successful organisation. By assessing and improving governance structures, and ensuring effective controls are in place, Internal Audit helps create a robust framework for decision-making, oversight, and accountability. This fosters not only regulatory compliance but also strategic alignment, enhancing organisational excellence.
Repositioning internal audit: Key considerations
For Internal Audit to effectively serve as a strategic business partner, organizations need to consider the following:
1. Mindset Shift: The organisation must first recognise and acknowledge the potential of Internal Audit. There needs to be a shift from viewing Internal Audit as a cost or regulatory burden to seeing it as a source of strategic insights and value creation.
2. Skilled personnel: Internal auditors must possess not only technical auditing and accounting skills but also business acumen, strategic thinking, and effective communication skills. They need to understand the business, industry trends, and the strategic landscape to provide valuable insights.
3. Support from top management: The Internal Audit function must have support from top management. This includes adequate resources, access to all parts of the organisation, and a clear mandate to extend their role beyond traditional boundaries.
4. Effective Communication: Internal auditors must communicate their findings, insights, and recommendations effectively. There should be open dialogue with management and the board, promoting mutual understanding, cooperation, and action.
Conclusion: The strategic auditor – A catalyst for excellence
In a rapidly changing business environment, organizations that leverage all resources at their disposal stand a better chance of achieving sustainable success.
The Internal Audit function, if appropriately positioned and equipped, can be a significant strategic resource.
As a strategic business partner, Internal Audit brings a unique blend of capabilities, providing assurance, offering valuable insights, promoting operational efficiency, and enhancing governance.
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However, this transition does not happen overnight. It requires a shift in mindset, skilled personnel, top management support, and effective communication.
The strategic auditor is no longer a distant concept but an imminent reality. As organizations navigate their paths to excellence, the Internal Audit function, the 'strategic auditor,' will undoubtedly play an increasingly significant role.
As auditors, we must be ready to step up to this challenge and, as organizations, be willing to unlock the full potential of Internal Audit. By doing so, we do not just add value – we become invaluable.
The writer is an independent Internal Audit Advisor, Enterprise Risk Management Consultant, and professional trainer. He is the founder and the Chief Operating Officer of Redric Consulting, your trusted partner for comprehensive training and consulting services in the fields of Governance, Risk, and Compliance (GRC).
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With a proven track record in Internal Audit, Internal Control, Compliance, Fraud Risk Management, and Cybersecurity, Redric Consulting empowers your organisation and ensures its success.
You may reach out to Frederick at [email protected]