How Well is Your Internal Audit Function Performing?

The Auditor General of the Australian State of Victoria recently released a fascinating report on internal audit performance.

As the report notes:

In this audit, we examined the internal audit functions of all seven portfolio departments and assessed how well they use their internal audit resources.

We evaluated the 1) role and positioning of the internal audit function within departments, 2) its independence and objectivity, 3) the alignment of internal audit plans with departmental goals and risks, 4) quality assurance and 5) resourcing, 6) performance against stakeholder expectations, and 7) the communication of internal audit outcomes and insights (our numbering).

If you only knew that about the report it would be worth reading as a means of measuring how your Internal Audit is functioning.

There is a lot to like in this publication and it is one of those reports that a summary doesnt really do it justice.

There was one part of the report that we wanted to pull out however and that was the Department of Treasury and Finance’s response to the Auditor General’s recommendation that departments complete a self-assessment of compliance with the Institute of Internal Auditors Standard.

Their response is now the second time in the last couple of weeks that we have seen a major organisation – for that is what the Victorian Department of Treasury and Finance is – state publicly that they do not consider that the Institute Standards apply.  (The other being a very large Asian company and we should note that over the last year we have received probably 20 emails from different companies on point who were not prepared to speak publicly.)

They noted:

Not support.

From a whole of government framework perspective, the Department of Treasury and Finance confirms that the application of the International Standards for the Professional Practice of Internal Auditing is supplementary to the mandatory requirement of the Standing Directions,  Moreover, the Financial Management Act 1994 only permits the mandating of Australian accounting standards.

The Department does not consider that conducting a complete self-assessment of compliance with the international standards as a necessary part of the internal audit cycle. (Our emphasis).

For the moment we will withhold our view on this other than to say that is this a sign that cracks are starting to appear in the Institute of Internal Auditors’ desire for allegiance with what are – in the end – optional standards of compliance?


As valuable as it is to a Chief Audit Executive to read we would suggest that this report is more valuable to Audit Committees the world over to ask of their Internal Audit functions whether they are measuring up and if not what they are doing about it.


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