How to lead an effective internal audit function

By Ken Tysiac

Leaders of the most effective internal audit functions demonstrate five key qualities, according to PwC’s 2016 State of the Internal Audit Profession Study.

Expectations for internal auditors are high. In the survey of more than 1,600 chief audit executives and their stakeholders, 54% of stakeholders said internal audit is contributing significant value, an increase of 6 percentage points from last year.

Sixty-two percent of stakeholders said they expect even more value from internal audit, including almost half of those who said they already receive significant value.

Perhaps predictably, the survey found a close correlation between strong leadership and internal audit’s ability to add value and deliver high performance.

“To continue fostering internal audit functions to become trusted advisers within their organizations, stakeholders should promote strong internal audit leadership, while audit executives work to elevate the performance and perceptions of their respective functions,” Jason Pett, PwC’s internal audit solutions leader, said in a news release.

The most effective internal audit leaders, according to the PwC report, consistently exhibit five traits:

  • Create and follow through on a vision. The most effective internal audit leaders have a vision that aligns with the organization’s strategic direction and informs their strategic plans, investing in capabilities to support that vision.
  • Source and retain the right talent. Mentorship, talent development, and the ability to source the right talent are keys for effective internal audit leaders. Almost three-quarters (73%) of very effective internal audit leaders include co-sourcing as one of their talent strategies.
  • Empower the internal audit function. Almost four out of five very effective internal audit leaders are vice presidents or hold senior positions in their organizations. Stakeholders acknowledged in the survey that they have a responsibility to empower the chief audit executive by creating a culture that supports a strong control environment.
  • Demonstrate executive presence. The most effective internal audit leaders bring bold perspectives and think broadly about the company.
  • Partner with the business in meaningful ways. To be effective leaders, internal auditors must develop relationships built on trust, build partnerships across the lines of defense to coordinate risk management across functions, and use those connections to develop an integrated assurance strategy across the organization.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

TECHNOLOGY Q&A

How to create maps in Excel 2016

Microsoft Excel 2016 has two new mapping capabilities. J. Carlton Collins, CPA, demonstrates how to make masterful 2D and 3D maps in Excel 2016.

QUIZ

News quiz: Economy and health care changes top CPAs’ list

CPA decision-makers’ economic outlook and the House Republicans’ proposed tax changes as part of replacing the Patient Protection and Affordable Care Act received attention recently. See how much you know with this short quiz.