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Five Characteristics of an Impactful Internal Audit Department


Five Characteristics of an Impactful Internal Audit Department

Richard Chambers, former CEO and President of IIA Global, in his recent blog posed the challenge for internal auditors to make a real impact. The days when it was a matter of being value protectors who patrolled the organisation looking for fraud, waste, and mismanagement are over.

To make a true impact in 2022, internal auditors must also be change agents who are catalysts for transformational ideas that help create value for the organisations.

If there is doubts about the impact of internal audit in organisations a Deloitte survey found 60% percent of chief audit executives (CAEs) believed the internal audit function did not have a strong impact and influence within their organisation. And, while that was bad news for internal auditors, it was an improvement from 72% in an earlier survey.

Chambers in discussing the impact internal audit has on the wellbeing of organisations says “In organisations where internal audit does not make a substantial impact or exert a strong influence, we need to acknowledge that some of our own actions contribute to the problem. I don’t want to play the blame game here, but the path to fixing a problem starts with acknowledging it. If most CAEs believe internal audit doesn’t make a big impact in their organisations, it is vital to understand why”.

Chambers found from meetings with members of the audit committee and C-suite that internal audit functions that are generally regarded as influential seem to share several characteristics.

1. Focusing on Critical Risks

If you aren’t focusing on the organisation’s most critical risks and monitoring those that may become critical in the future, it shouldn’t come as a big surprise that you may not be making an impact. For years, internal auditors acknowledged how critical cyber risks were in their organisations, but only in the last couple of years have audit plans begun to reflect the level of risk. The same is true of environmental risks such as climate change. Acknowledging the risk is there will have little impact compared with focusing internal audit resources on the risks where appropriate.

2. Enhancing Business Expertise

Internal auditors who don’t understand the business, will never be in a strong position to offer influential advice. For internal auditors, having audit expertise isn’t enough: We also must cultivate a deep understanding of the business, so that we can engage in credible conversations with management and the board on business and strategic risks facing the organisation. After all, internal auditors must be credible before they can be incredible.

3. Sharing Insights and Advice

Influential internal audit departments don’t simply check other people’s work or try to catch errors; they offer advice for making improvements. If your advice results in substantial savings or eliminates unnecessary expenses, for example, then you most likely will be influential. But if your internal audit report simply points out routine paperwork errors from the past, your influence is probably limited.

4. Improving Internal Audit Innovation

Multiple studies have found that internal audit groups that adopted innovative approaches and methods tended to have greater impact and influence than those that do not. More than two-thirds of the Deloitte survey respondents with strong impact and influence said they expected to increase their investment in internal audit innovation over the next three to five years, citing developments such as data analytics, robotic process automation/cognitive technologies, predictive analytics, risk anticipation, and adopting agile approaches.

5. Identifying Emerging Risks and Sharing Foresight

It is an anathema that any CAE would be content to lead an internal audit function that is not seen as impactful or influential in its organisation. When internal audit is not seen as impactful, it is not time to point fingers. It is time to roll up our sleeves.

There are a lot of factors that determine whether your internal audit function has a strong impact and influence. The vast majority are within your control. What are your thoughts on internal audit impact and influence?

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