Internal audit should become strategic risk advisers to the board, asserts new study from PricewaterhouseCoopers

Must aid C-suite in positioning business for long-term success

June 7, 2010 — With the worldwide economic crisis making strategic risk management a key issue for business leaders, a new survey from PricewaterhouseCoopers suggests that internal audit has the right company-wide vantage point to serve as strategic risk advisers to boards.

PricewaterhouseCoopers’ Global State of the Internal Audit Profession survey polled more than 2,000 executives from 55 countries, (including 82 leading Canadian organizations) and concluded that, to remain relevant and meet stakeholder demands, internal audit must evolve to an enhanced "Internal Audit 2.0" state that provides business leaders with actionable business risk intelligence.

Brenda Eprile, PwC Canada's lead Internal Audit partner, said: “The financial crisis has caused heightened scrutiny of companies' risk management practices. As many have blamed the crisis on poor risk management, CEOs across all industries are looking to upgrade their enterprise-wide risk management capability to better prepare for success in what is likely to be a very challenging business environment. 

“Needs and expectations for internal audit have never been higher, so the key question is whether internal audit is delivering. There is also a challenge in building consensus for an expanded and more strategic role for internal audit.”

The study identifies three critical focus areas for internal audit departments:

• Critical risks and issues
• Aligning internal audit's value position with its stakeholders’ expectations
• Matching the staffing model with that value proposition.

Eprile added: “What senior executives should take away from this survey is that, for an internal audit team to assume the role of strategic partner, it must be comprised of highly experienced and skilled professionals who can pinpoint trouble spots, synthesize a lot of data, better utilize technology and help the organization be more successful in a very challenging business environment.”

With these new challenges in mind, PwC believes internal audit must take a more radical approach to change than it has in the past, and rethink and redefine the way it works.

The study also finds that Canadian respondents are putting more effort on emerging risks, and strategic initiatives and programs.

“In this year's survey, we introduced the concept of "Internal Audit 2.0" to start organizations thinking about dramatic change,” says Eprile. “As internal audit confronts new and continually changing needs and expectations, it must take the initiative to redefine its role. That means expanding its skill sets and preparing to take a leadership role as a more powerful resource for senior executives, directors and boards in aligning strategy and risk identification, control and mitigation.”

The 2010 Global State of the Internal Audit Profession survey for internal auditing was conducted in the fourth quarter of 2009 and includes responses from over 2,000 participants from more than 50 countries. Overall, 82 of these executives were from leading organizations in Canada. To download a full copy of the report, “Internal audit professionals face a future rich in opportunity: PricewaterhouseCoopers 2010 State of the Internal Audit Profession study,” visit: http://www.pwc.com/en_CA/ca/risk/internal-audit/publications/future-rich-in-opportunity-2010-04-en.pdf