The report, published on 20 June, contains some stern comments about the quality and capability of internal audit, based on the NAO’s own analysis and feedback from internal audit’s public-sector stakeholders.
But it does acknowledge that internal audit teams can only be as good as the governance structure within which they operate. The conclusion here is that parts of that structure – the practice standards to which internal audit works; internal audit’s key customers and their understanding of its role and value; the leadership of the government's internal audit profession; and the processes for developing the capabilities of internal auditors – all need serious attention if internal audit is to deliver in the manner required to ensure successful public-sector reform.
The institute has welcomed the report’s ringing endorsement of the importance of effective internal audit to strategy and governance in the public sector. We also acknowledge the gaps identified in the government’s approach to internal audit.
Three things need to be done:
* Ensure the consistent application of internal audit standards and develop appropriate practice guidance for internal audit teams.
* Improve the relationship between internal audit and management at executive and non-executive level.
* Support internal audit by investing in appropriate professional development.
The institute is already heavily involved in some key initiatives in these areas. For example, alongside the Chartered Institute of Public Finance and Accountancy (Cipfa), we have established a board to develop the enhancements and interpretations required to increase the effectiveness of the IIA’s International Professional Practices Framework as the basis of public-sector internal audit standards. Our collaboration with Cipfa also focuses on the development and delivery of new training and education programmes for public servants working as internal auditors and financial managers.
And, in collaboration with the NAO, we have produced a set of internal audit case studies of current practice in private- and public-sector organisations, designed to prompt ideas and support the development of government internal audit teams.
These initiatives are only the start. There is clearly much more to do to increase understanding of the value of the profession, embed professional practice and help members to improve their skills. Building stronger relationships in the public sector is key to this.
In anticipation of the report’s publication, we invited the head of the NAO, Amyas Morse, to speak at our annual dinner in a few weeks’ time. We also have Andrew Baigent, NAO director-general, financial audit, speaking at our annual conference. It will be very interesting to obtain further insights into the NAO’s report and see how far we are from achieving its vision for internal audit, which Andrew set out in the March/April issue of Audit & Risk.
Ian Peters, CEO at the IIA.