A new report out from the Institute of Internal Auditors’ research arm provides some needed insight on how internal audit can better align itself with the rapidly changing strategic direction of the company.

The research, conducted by the IIA’s Internal Audit Foundation, finds that while internal audit has made some progress in better supporting the strategic objectives of the organization, there is still some work to be done to achieve better alignment.

Among the findings of the report are:

• 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 level of credibility of the internal audit function given by auditees, management, and board impacts the internal auditors’ understanding of the strategy.

“The current business environment is changing constantly, and companies must change their priorities accordingly. As a consequence, internal auditors need to stay dynamic in order to develop a plan and conduct audits that are aligned to the business changes,” the report’s authors write.

More Focus on Strategic Risks
Indeed, just 39 percent of internal audit respondents to the survey say that strategic business risks are among the top five risks on which the current audit plan is based, although more than half say it will increase in influence on the audit plan during the next few years.

“The involvement of the internal audit function in strategically important issues after the audit can be a source of added value for organizations. Management can view internal audit as a partner that helps to adapt the scope of the strategy to respond to risks,” the report’s authors write. “Nevertheless, these results appear to be relatively low given the privileged positioning of the internal audit function within the organization that could provide useful input to the strategy about risks.”

If internal audit is to demonstrate its value, it will need to become increasingly involved in strategic objectives of the organization and provide management with more insight on strategic risks and obstacles to achieving the company’s goals. 

For more on aligning internal audit with the strategic direction of the company, see “Many Internal Audit Failures Stem from Misalignment with the Company Strategy.”