Aligning Internal Audit Activities and Scope to Organizational Strategy
(2018) , 27 pages
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- Authors
Sarens, Gerrit 
- Abstract
- The current business environment is changing constantly, and many organizations are shifting their strategy to cope with this vibrant environment. How does change impact the internal audit function? At which levels does the organizational strategy impact internal audit’s scope and role? These questions are the basis of this research project. To understand the alignment between strategy and the internal audit function, this research project was divided into two phases. First, chief audit executives (CAEs) and management committee members were interviewed. Second, a survey was submitted to internal auditors through the IIA network in North America. The people interviewed or surveyed operate in diverse industries in financial and nonfinancial sectors. The analysis merges the interview responses with the survey findings. Consequently, the following results emerge: • The changing environment requires the internal audit function to have dynamic planning to be able to adapt at the same speed as the strategic risks change. • Strategic risks become increasingly important. Nevertheless, they are not considered to be a top priority by the internal audit function. • The business environment becomes increasingly digital and IT risks grow in importance. • Digitization is affecting changes in the skills required of internal auditors. IT skills (particularly data analytics skills) are increasingly considered among the most important. • Demands for advisory and consulting services have increased over time. This is a consequence of the changing and digitized business environment. • Specific strategic profiles have an influence on the outsourcing of internal audit activities. This involves strategies based on mergers, acquisitions, unrelated diversification, and vertical integration. Outsourcing internal audit activities requires a higher level of coordination between internal auditors because of the mix of internal and external staff. • Organizations going through major structural changes (due to mergers, acquisitions, unrelated diversification, and vertical integration) seem to outsource more of their internal audit activities. This can be seen as a (temporary) solution to compensate for missing skills or a significant increase in the audit workload due to these structural changes. • The level of credibility of the internal audit function given by auditees, management, and board impacts the internal auditors’ understanding of the strategy. The next sections develop these findings in detail by providing statistical results and responses from the interviews collected during this research. Each section provides a list of practical implications for internal audit practitioners.
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Citations
Betti, N., & Sarens, G. (2018). Aligning Internal Audit Activities and Scope to Organizational Strategy. https://hdl.handle.net/2078.5/61064