METHODS OF MEASURING THE PERFORMANCE OF INTERNAL AUDIT

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12 Number of complaints about audit department Process 13 Role of internal auditing viewed by the audited Audit environment 14 Number of management requests Audit environment The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010 140 15 Percent of certified staff Input 16 Number of process

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The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. like Which methods of measuring the of internal audit s performance are more relevant and more. METHODOLOGY OF SCIENTIFIC RESEARCH, The scientific research methodology of this paper is based on fundamental type of research. trying to make a review of main approaches ideas and opinions of high rated specialists regarding. the internal audit s performance trying to identify the next key trends of the researched area. Combined with the method of critical analysis of recent publications and various articles and. studies in international literature we used the analysis of case studies that described internal audit. practices used by the leading international companies more recently The main objective of this. study is to determine the main methods that could be used for the most relevant evaluation of. internal audit s performance So the construction of the research methodology was focused over the. identification of the potential answers at the question. 1 Which methods are more relevant for the measuring of internal audit s performance. 2 Which are the main characteristics of internal audit practices used by leading international. companies for measuring and evaluating the effectiveness. In the process of finding solutions at the problems discussed we investigated high rated. articles and papers reports and recommendations combining the documentation process with the. observation process materialized in its two forms participative and non participative Finally we. tried to synthesize the most relevant methods and techniques that could be used as guidelines for the. assessment of internal audit s effectiveness,LITERATURE REVIEW IN THE RESEARCH AREA. Ernst Young one of Big Four Audit firms conducted a few relevant studies regarding the. international audit practices the results being incorporated into so called studies Global Internal. Audit Survey Next we are going to refer at the more recently studies realized in 2007 ant 2008. The report Global Internal Audit Survey 2007 Ernst Young 2007 highlights the findings of. survey made through internal audit executives representing 138 predominately public companies. representing membership in the Global Business Week 1000 and the Standard Poor s Global 1200. from 24 countries most of the participants companies being large multinational functions with. revenues over US 4 billion The results of this survey show that half of the respondents 50 do. not track the value their internal audit function provide to the organization while only 13 measure. value based upon actual cost savings The importance of value tracking is given by the fact that. reinforces internal audit s relevance as well as help to justify the investment in necessary resources. for internal audit Regarding the methods used for the evaluating of internal audit s performance. the survey Ernst Young 2007 showed that, the most used methods for measuring internal audit s effectiveness are represented by. Completed internal audits in comparison to the internal audit plan 89 and. The length of time for issuing internal audit reports 72. only 32 of respondents use length of time for resolve internal audit findings as a key. metric and,23 use support of key business initiatives. The survey realized by Ernst Young next year Ernst Young 2008 emphasized that. beside the methods identified in 2007 survey used in measuring internal audit s performance. completed internal audits in comparison to the internal audit plan and the length of time for issuing. internal audit reports there is one more frequently used namely the results from shareholders. surveys The survey Ernst Young 2008 identified that. The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. only 34 of respondents use length of time to resolve internal audit findings and. only 22 use support of key business initiatives as a key metric. According to Ernst Young Survey from 2008 the most used methods to measure internal. audit effectiveness are presented in Figure 1, Figure 1 Metrics used in measuring internal audit effectiveness.
Source Ernst Young 2008, Starting with 1993 The IIA s Global Auditing Information Network GAIN has realized. different benchmarking information over different topics of internal audit Many GAIN participants. were interested to identify the most relevant methods for evaluating the internal auditing department. effectiveness Ziegenfuss 2000 presents the results of a study involving CAEs participating in the. GAIN project and there were identified five top performance measures like. 1 Staff experience,2 Auditing viewed by the audit committee. 3 Management expectations of internal auditing, 4 Percentage of audit recommendations implemented and. 5 Auditor education levels, According to Ziegenfuss 2000 we present in the Table no 1 and Table no 2 the top twenty. of performance measures for internal audit activity as follows. Table 1 TOP 20 Gain Performance Measures as ranked by CAEs. Overall Ranking Performance measures Audit process. 1 Staff experience Input, 2 Auditing viewed by the audit committee Audit environment.
3 Management expectations of internal auditing Audit environment. 4 Percent of audit recommendations implemented Output. 5 Auditor education levels Input,6 Audited satisfaction survey Process. 7 Importance of audit issue Output,8 Training hours per internal auditor Output. 9 Audit committee satisfaction survey results Audit environment. 10 CAE reporting relationships functional Audit environment. 11 Audit committee risk concerns Audit environment. 12 Number of complaints about audit department Process. 13 Role of internal auditing viewed by the audited Audit environment. 14 Number of management requests Audit environment. The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. 15 Percent of certified staff Input,16 Number of process improvements Output. 17 Quality assurance techniques developed Audit environment. 18 CAE meets privately with audit committee Audit environment. 19 IT integrated auditing Audit environment,20 Average years of audit experience Input. Source Ziegenfuss 2000, Table 2 TOP 20 Gain Performance Areas as ranked by CAEs.
Overall Ranking Performance areas,1 Auditor quality. 2 Standing with audit committee,3 Management satisfaction. 4 Quality of findings,5 Auditor quality,6 Audited relations. 7 Quality of findings,8 Audit resources,9 Standing with audit committee. 10 Organizational status,11 Audit committee effectiveness.
12 Audited relations,13 Management satisfaction,14 Management satisfaction. 15 Auditor quality,16 Quantity of findings,17 Quality assurance. 18 Audit committee effectiveness,19 Audit mix,20 Auditor quality. Source Ziegenfuss 2000, When CAEs participating at GAIN survey were asked to identify the five most vital and. important measures for evaluating the internal audit performance their responses were quite. interesting We present them in the Table 3, Table 3 Most critical performance measures in the vision of the CAEs.
Overall Ranking Performance measures Audit process. 1 Audited satisfaction survey results Process, 2 Percent of audit recommendations implemented Output. 3 Number of management requests Audit environment, 4 Audit committee satisfaction survey results Audit environment. 5 Importance of audit issue Output, 6 Management expectation of internal auditing Audit environment. 7 Staff experience Input,8 Completed vs planned audits Process. 9 Number of process improvements Output,10 Training hours per internal auditor Input.
11 Role of internal auditing viewed by the audit committee Audit environment. 12 Number of major audit findings recommendations Output. The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. 13 Amount of audit savings Output, 14 CAE reporting relationship functional Audit environment. 15 Percent of certified staff Input,16 Number of complaints about audit Process. 17 Quality assurance techniques developed Audit environment. 18 Audit committee risky concerns Audit environment. 19 Number of repeat findings Output, 20 Days from end of field work to report issuance Output. Source Ziegenfuss 2000, Frigo M L had a significant contribution at the researching of the internal audit s. performance He propose the using of Balanced Scorecard instrument in the evaluating of the. performances of an internal audit department through his paper totally dedicated to this problematic. A Balance Scorecard Framework for Internal Auditing Departments Paperback a paper. realized in cooperation with The Institute of Internal Auditors Research Foundation The author of. this study wanted to develop a model of Balanced Scorecard for internal audit departments. following to emphasize the ways that internal audit departments could improve their activities. regarding the measuring of internal audit performances The Balanced Scorecard model presented. by Frigo M L 2002 is approached from few key elements perspectives like. 1 Internal audit customers audit committee management and the audited. 2 Internal audit process,3 Innovations and capabilities.
For the construction of this model Frigo starts from the premise that there are some key. concepts of this model that could be applied for the internal audit departments like. measuring the performance from customer s point of view. determination of some certain indicators for the quantifying of the internal audit performance. the connection between internal audit and customer expectation. focusing on general strategies of the department,innovation and capabilities of internal audit. Arena Azzone 2009 realized a study through they followed to understand the. organizational drivers of internal audit effectiveness taking into account the recent changes of the. internal auditing and its central role in corporate governance The data used for this study were. collected through a questionnaire which was sent to 364 Italian companies and a response rate of. 47 was obtained On the basis of data from 153 Italian companies Arena Azzone 2009. survey emphasizes that the effectiveness of internal auditing is influenced by factors like. the characteristics of the internal audit team,the audit processes and activities and. the organizational links, It was observed an increasing of internal audit effectiveness particulary when. the ratio between the number of internal auditors and employees grows. the Chief Audit Executive is affiliated to the Institute of Internal Auditors. the company adopts control risk self assessment techniques and. the audit committee is involved in the activities of the internal auditors. INTERNAL AUDIT PRACTICES FOR EVALUATING THE PERFORMANCE. USED BY LEADING INTERNATIONAL COMPANIES, The study realized by PROTIVITI one of the largest providers of internal audit services and. consultancy from United States and Canada in cooperation with The Institute of Internal Auditors. The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. Protivi Knowleadgeleader 2010 have been continued the series of studies realized by Protiviti. starting with 2005 each of these studies analyzing the internal audit practices at leading. international companies from different point of views The last volume VI Internal Auditing. Around the World tries to establish a summary of the profiles of technology enabled internal audit. functions at leading international companies, Due to the value provided by technology based audit and data analysis techniques internal.
audit has now the capability to examine vast amounts of data identify patterns and potential risks. in this way internal audit being able to provide better recommendations to management and to the. board which would determine a greater effectiveness and performance for internal audit activity. The study Protivi Knowleadgeleader 2010 presents data for nine international leading. companies Based on the data provided by this study next we try to outline a synthesis of elements. of internal audit practices used by these companies in the measuring of internal auditing. performance,1 ACCENTURE,Industry Professional Services. Number of employees 181 000,Annual Revenues US 21 6 Billion. Auditors in IA Function 45,Number of Years IA Function has been place 9. IA Director CAE reports to Chief Risk Officer CRO, Metrics used for measuring of the internal audit performance. Effectiveness of global risk coverage,Scope and dept of coverage.
Quality of internal audit reporting to management and the audit committee. Quality of internal audit staff leadership development and qualifications. Efficiency of the overall internal audit function, Efficacy in covering existing and emerging risks and new businesses. Using of balanced scorecard approach to track key departmental metrics. 2 COMMONWEALTH BANK,Industry Financial Services,Number of employees 44 218. Annual Revenues AUS 34 9 Billion,Auditors in IA Function 90. Number of Years IA Function has been place 21, IA Director CAE reports to Chief Financial Officer CFO. Metrics used for measuring of the internal audit performance. Audit client feedback,Internal post audit review,3 DENTSPLY INTERNATIONAL.
Industry Medical Instruments Supplies,Number of employees 9 400. Annual Revenues US 2 2 Billion,Auditors in IA Function 5. Number of Years IA Function has been place 15, IA Director CAE reports to Chief Risk Officer CRO and Chair of Audit Finance Committee. The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. Metrics used for measuring of the internal audit performance. The performance of audits according to the annual plan. The issuance of audit reports within 10 days from the last day of fieldwork. Minimal audit director manager review notes,Minimal audit plan risk assessment changes. Value added recommendations written into the audit report. Risk based assessment with priority ranking given to the audit plan. 4 DEUTSCHE BANK,Industry Financial services,Number of employees 77 053.
Annual Revenues US 40 Billion,Auditors in IA Function 400. Number of Years IA Function has been place 50, IA Director CAE reports to Management board Group CFO. Metrics used for measuring of the internal audit performance. Balanced scorecard approach aligned to Deutsche Bank s strategic objectives The four. performance indicator categories are people processes financials and service. Report to management board and audit committee with regard to audit plan progress and. key control deficiencies,Industry Consumer electronics. Number of employees 116 000,Annual Revenues 23 Billion. Auditors in IA Function 75,Number of Years IA Function has been place 70.
IA Director CAE reports to Chief Executive Officer CEO President. Metrics used for measuring of the internal audit performance. The compliance with the audit plan that contains a number of issues. The measuring of audit scope around financial reviews business audits and strategic risk. audits and the connection to an assessment of overall risks in Philips. The measuring of performance on a continuous basis reporting to the company s. supervisory board audit committee on its progress,Industry Computer Software. Number of employees 47 578,Annual Revenues 10 7 Billion. Auditors in IA Function 34,Number of Years IA Function has been place 14. IA Director CAE reports to Chief Executive Officer CEO. Metrics used for measuring of the internal audit performance. Analysis of audit cost including costs per engagement. Display audit results from geographical regions,Audit survey results. Developing conceptual approaches such as continuous auditing. The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. Industry Energy,Number of employees 101 000,Annual Revenues US 278 Billion.
Auditors in IA Function 250,Number of Years IA Function has been place 50. IA Director CAE reports to Chair of Audit Committee. Metrics used for measuring of the internal audit performance. The audit scope, The progress in action implementation of audit recommendation. Industry Financial Services,Number of employees 822. Annual Revenues 117 7 Billion,Auditors in IA Function 3. Number of Years IA Function has been place 2, IA Director CAE reports to Chief Executive Officer.
Metrics used for measuring of the internal audit performance. Evaluation of board s satisfaction with the internal audit team work and findings. Measuring the satisfaction of audited after each audit engagement. Examination of financial benefits that company achieves through the implementation of audit. recommendation, A global analysis of what audit brought to the organization in terms of cost reduction and risk. management improvement,9 TALECRIS BIOTHERAPEUTICS,Industry Pharmaceuticals. Number of employees 4 800,Annual Revenues US 1 5 Billion. Auditors in IA Function 3,Number of Years IA Function has been place 3. IA Director CAE reports to Chair of Audit Committee dotted line report to CFO. Metrics used for measuring of the internal audit performance. Traditional methods like making sure that internal audit is on target with budgets. productivity and quality, The evaluation of accomplishing of audit plan from an investigation standpoint and if they.
are resolving issues as they emerge, The acceptation of internal audit recommendations by management. The evaluating of organizational tone of accepting internal controls. It can be observed a strong preoccupation for internal audit directors with regard to. effectiveness and performance of internal auditing The technology provides a great added value for. a lot of activities including internal auditing Thanks to technology now internal auditors have the. possibility to assess the entirety of their transactions being able to develop data analysis more. accurate and complete As the director of internal audit from Shell company remarks Internal. auditors have strengthened the assurance they provide Protivi Knowleadgeleader 2010. On the other side due to this great advantage represented by technology the expectances. from internal auditors are now more than ever and from here arises the intense preoccupation for. The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010. internal auditors to measure their effectiveness and to prove the value added provided to their. A synthesis of the main metrics used by international leading companies for measuring and. evaluating the performance of internal audit is given as follows. Using of Balanced Scorecard instrument, Using qualitative methods by realizing some satisfaction studies for the clients of internal. audit one main objective being the identifying of the potential causes for the unhappiness of. the client, implementation of some assurance quality programs and the accountability to realize annual. assessments of internal audit quality, other instruments used for the measuring of the internal audit s effectiveness are informal. reports for the management different monitoring systems of a necessary time for fulfilling. the audit missions and the quality of internal audit reports. CONCLUSIONS, Taking into account the difficult economic conditions that we are passing through it s.
become obviously that one of the main challenge that will influence the next perspectives of. internal audit development will be determined by the necessity for internal audit to prove the added. value provided and so to find the most relevant methods and techniques to evaluate internal. auditing performance, With no doubt we can conclude that both stakeholders and internal auditors themselves. recognize the critical focus of management under internal audit is analyzed which require the. fundamental rethinking of the internal audit strategy It is necessary for internal audit profession to. achieve a significant step toward some radical changes with regard to how internal audit works and. the value added by its functioning to meet successfully the requirements of Executive Directors. members of audit committees and even internal auditors In our opinion it s quite important in the. process of metamorphosis of internal audit to give the internal auditors the opportunity to develop. the range of skills necessary in carrying out tasks focusing more insistently on the ability to. identify potential risks and strategies to manage and mitigate these risks. Analyzing internal audit practices there could be identified many methods and instruments. that are considered as being quite relevant for measuring and evaluation of internal audit efficiency. In our opinion the choice of different metrics for evaluating the performance depends on the. settlement of the main objective of trying to obtain the best reflection of internal audit s relevancy. and efficiency offering arguments for investment for a good developing of internal audit. department, In our opinion there are few general rules that have to be respected by internal auditors in. order to assure their contribution at the progress of the company. the internal audit strategy has to be focused over the concept of value added for the work. environment, Internal auditors must be aware over their responsibility to demonstrate to the management. and the audit committee how internal audit works, Internal auditors have to be also aware of their responsibility to find the most relevant. methods and techniques in evaluating their performance. Starting from the real level of performance determined internal auditors have to find. solutions for improving internal audit strategy if it s necessary in order to assure the top. level of effectiveness, The Annals of The tefan cel Mare University of Suceava Fascicle of The Faculty of Economics and Public Administration Vol 10 Special Number 2010.
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No 3 accesible on line la http www ey com Global Assets nsf Ukraine E. Internal Audit Brochure Eng file 10 Questions eng pdf. 11 Pop A Bo a Avram C 2009 Criza economic global activitatea de audit intern ar fi. putut preveni aceast criz Revista de Audit Financiar Nr 7 2009 pp 14 22. 12 Prawitt D F 2003 Managing the internal audit function The Institute of Internal Auditors. Research Foundation accesibil on line la www theiia org. 13 PricewaterhouseCoopers 2010 State of internal audit profession accesibil on line la. http www pwc com us en internal audit publications 2010 study internal audit. profession jhtml, 14 Protivi Knowleadgeleader 2010 Internal auditing around the world Profiles of Technology. Enabled Internal Audit Functions at Leading International Companies Protivi. Knowledgeleader accessible on line la www knowleadgeleader com Vol VI. 15 Ziegenfuss D E 2000 Measuring performance Internal Auditor February accessible on line. at http findarticles com p articles mi m4153 is 1 57 ai 62599893 tag content col1.

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