Internal audit functions that have very effective leadership perform better and add greater value to their businesses, according to a new report by PwC covering 1,600 chief audit executives (CAEs), senior management and board members.
As companies face more risks than ever, they are looking to their internal audit functions to deliver value by educating stakeholders on emerging risks and leading risk management practices that would improve the business.
The PwC 2016 State of the Internal Audit Profession Study found a clear correlation between value and leadership. Strong leaders are the driving force behind internal audit’s ability to add value and deliver excellence beyond its traditional role.
It notes that in order to continue fostering internal audit functions to become trusted advisors within their organisations, stakeholders should promote strong internal audit leadership, while audit executives work to elevate the performance and perceptions of their respective functions.
“Both the global and the Middle East responses to PwC’s 2016 survey show that, as a profession, internal audit delivers value (74 percent and 95 percent respectively); and for the Middle East, that value is significant (80 percent),” said Andrew Garrett (pictured), Head of Internal Audit Services at PwC Middle East.
“This is extremely encouraging for the profession, but there is room for improvement - 83 percent of our global respondents who received some value and 46 percent of those who received significant value still expect more value from internal audit. When we asked the same question of our Middle East survey participants, their answer was overwhelmingly ‘Yes’ (100 percent of Middle East respondents),” he added.
More than half of the stakeholders who participated in PwC’s study revealed that they now believe internal audit is contributing significant value – up six points from 2015.
The study also highlights that 62 percent of stakeholders expect more value from internal audit with 55 percent expecting internal audit to be a more proactive trusted advisor within the next five years.
While overall, almost one-third of Middle East respondents rated their leaders as effective (29 percent), only 14 percent rated them as very effective.
The reverse is true globally, with almost 1/3 of global respondents rating their leaders as very effective (27 percent) and 20 percent as effective. However, a worrying percentage of responders (28 percent) rated their Middle East Leadership as being either Ineffective or Very Ineffective, compared to only 14 percent of their global counterparts.
According to the report, the most effective internal audit leaders possess a strong vision and develop an internal audit strategy that aligns with both their organisation’s strategic direction and their stakeholders’ expectations.
According to the report, strong positioning within an organisation enables the most effective leaders to facilitate proactive discussions about strategic risks as well as influence others in order to build an effective culture of controls throughout the organisation.
