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Measuring Internal Audit Performance

PricewaterhouseCoopers has released a new report on how internal auditors can take advantage of metrics to get better results.

The report, “Metrics by Design: A practical approach to measuring internal audit performance,” explores how all internal audit functions can leverage metrics to communicate the value they provide to an organization and drive results.

PwC noted that as expectations of the internal audit function rise and its scope expands, budgets are tightening and pressure from regulators is increasing. In such an environment, internal auditors need to deliver better value to the organizations where they work beyond showing how well they run their group. Internal audit needs to capture and report on the contribution it is making.

To do this well, leading internal audit functions are re-designing their balanced scorecard of metrics to better align with what matters most to stakeholders.

When metrics align with what matters most to IA’s stakeholders, they drive results and performance that add value to the organization, the report noted. However, a balanced approach is still needed. Leading functions not only purposefully design metrics that focus on delivering superior operating results, they focus on balancing their scorecards across a few critical areas, such as process effectiveness, people, risk coverage and value.

Internal auditors increasingly need to handle risk management. “Expectations of internal audit have increased as companies find themselves in a more complex risk environment,” said the report. “In response, leading internal audit functions have transformed themselves to help their organizations manage risk more effectively.”

Taking a fresh look at internal audit metrics can have significant payoffs that lead to greater value creation, according to the report. Doing so can also help align internal audit and its stakeholders on the function’s mandate, clarifying any ambiguity that may be present across stakeholder groups. It opens the communication channels between the board, management, and internal audit on expectations and performance.

“Starting from internal audit’s mandate is essential as the mandate provides clarity of the scope of services and role of internal audit,” said the report.

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