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

Internal auditors should serve as strategic advisors on risk assessment and management, and must aid C-suite in positioning business for long-term success, indicate the findings of the Global Internal Audit Survey and a recent round table discussion organised by PwC Luxembourg.

Participants to the event, who were major players in the internal audit market in Luxembourg, reviewed the results of a new survey by PricewaterhouseCoopers entitled “A future rich in opportunity: Internal audit must seize opportunities to enhance its relevancy”. The study gathered the views of 2,000 participants from 55 countries.   

With the worldwide economic crisis making strategic risk management a key issue for business leaders, a new survey from PricewaterhouseCoopers suggests internal audit has the right company-wide visibility and mandate to serve as strategic risk advisers to boards.

Vincent Villers, PwC Luxembourg Internal Audit Lead Partner said:

“The financial crisis has caused a 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.”

Some areas to develop 

The study and the round table session organised by PwC Luxembourg on its premises, have identified several areas of opportunities to bridge the gap between new expectations about internal audit during crisis times and present internal audit functions: 

• extending the scope of internal audit assignments and adapting these towards consulting;
• constant concern for better compensating the lack of resources in crisis times by reassessing the number and type of resources;
• identifying the means necessary to increase efficiency and effectiveness of internal audit functions;
• exploiting available technologies that directly concern internal auditors to improve efficiency;
• collaborating with and integrating new functions such as Risk Management and Compliance;
• role played by audit with regards to governance.

The last two above-mentioned areas of opportunities have especially fueled the debate. “In Luxembourg, expectations for internal audit as to governance and strategic risks are very clear. But are internal audit functions well equipped and ready enough to take up the challenge?, Vincent Villers wondered. Internal auditors must find the wherewithal to meet the increased and changing expectations of stakeholders in crisis periods. In Luxembourg, sharing information and views between all assurance-related functions is a can’t-miss opportunity. Hence, the current system of personal development must be redesigned in order to promote the function and give it the position it needs within a company.”

Call for profound changes

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 survey outlines several important steps that should be taken:

• Start with a plan;
• Rethink risk assessment practices;
• Fill the skills and capabilities gap;
• Align with other assurance functions;
• Focus on obtaining return on investment (ROI) from technology.

Vincent Villers concludes: 

“During the discussion, we introduced the concept of "Internal Audit 2.0" to start organisations thinking about dramatic change. 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.” 

To download a copy of PwC’s study “A future rich in opportunity: Internal audit must seize opportunities to enhance its relevancy” online, visit www.pwc.com/lu/internalaudit

Notes to Editors : 

1. PricewaterhouseCoopers Luxembourg (www.pwc.com/lu) about 2000 professionals from 53 different countries. PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for our clients and their staeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

2. “PricewaterhouseCoopers” refers to the group of independent firms that are members of PricewaterhouseCoopers International network, each of which is a separate and independent legal entity.