Future of Internal Audit

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Insights on risk
July 2012

The future of
internal audit is now
Increasing relevance by turning
risk into results

Contents
1

Survey insights: an overview
Our survey results show that while 75% of respondents believe that their internal audit function has a positive impact on their overall risk management efforts, 80% acknowledge that their
internal audit function has room for improvement.

4

Increasing relevance from strategy to impact
To truly create value and assist the organization in achieving its business objectives, internal audit needs to focus on
aligning its strategy to the business. We offer four key steps internal audit can take to become more strategically relevant to the organization.

21

Conclusion: adding value
The future of internal audit is not on the horizon. It’s here. And internal audit functions need to act now to drive business impact — or be left behind.

Survey insights: an overview
In January 2012, Ernst & Young commissioned Forbes Insights
to conduct a global survey about the evolving role of internal audit. Respondents included chief audit executives (CAEs), C-suite executives and board members representing organizations
with global revenues of $500 million or more and spanning 26 industry sectors.
In the survey, 75% of respondents believe strong risk
management has a positive impact on their long-term earnings performance. An equal number believe that their internal audit function has a positive impact on their overall risk management efforts. And yet, 80% of respondents acknowledge that their

internal audit function has room for improvement. Of these
respondents, 70% believe that the improvements should be
undertaken within the next 24 months.
What sort of impact has strong organizational risk
management had on your long-term earnings performance?

Q:

The key priorities of both CAEs and
stakeholders have clearly shifted from
compliance and financial controls to
risk coverage and business relevance.
When we asked respondents about
the future of their internal audit
function — where they most need to
make improvements — their top five
priorities were:
1) Improving the risk assessment
process
2) Enhancing the ability to monitor
emerging risks
3) Becoming more relevant to
achieving the organization’s
business objectives
4) Reducing overall internal
audit function costs without
compromising risk coverage

3% 2%
10%
Strongly positive

33%

10%

Top five improvement
priorities for internal
audit

Somewhat positive

5) Identifying opportunities for cost
savings in our business

No impact at all
Somewhat negative
Strongly negative
Don’t know

42%
Insights on risk | July 2012

1

Survey insights: an overview

Q:

How would you rate your organization’s
internal audit function today?

Very
effective

Q:

19%

How pressing is your need to improve your
internal audit function?
1%

12%

28%

Somewhat
effective

17%
31%

Somewhat
ineffective

We need to make
improvements, but not
within the next 24 months

8%

Very
ineffective

We do not need to make
any improvements at
this time

2%
0%

10%

20%

30%

Don’t know

42%

40%

Trends in execution

Audit plan focus

Our survey further suggests that internal audit will continue to focus on a mix of business and information technology (IT) reviews, with an increased emphasis on strategic and operational risks.

15%

19%

Internal audit risk assessments, regulatory requirements and enterprise risk assessments will remain the top three drivers of the audit plan, mirroring the top two improvement priorities. Already, internal audit is playing a more prominent role in

organizational issues, such as:

14%

21%

Major capital projects (49%)
IT systems implementations (42%)
Mergers and acquisitions (37%)
Material contracts (32%)

13%
18%

Technology also remains a key area of focus for internal...
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