Friday, December 21, 2007

Quality assurance reviews

The dialogue among stakeholders, audit committees and the regulatory authorities on the role and performance of internal audit has never been more robust, or more candid. Getting the most out of internal audit is now a business imperative. It all starts with a PricewaterhouseCoopers’ (PwC) Quality Assurance Review –– and our commitment to quality improvement that goes beyond just compliance.

The quality asurance process Print-friendly version
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Today, more than ever, leading organizations depend on the quality of internal audit.

A business climate driven by demands for better governance, accountability and transparency has created new demands on internal audit. In this new climate, audit committees and management are asking tough questions about the quality and effectiveness of their internal audit functions.

Making quality count

PricewaterhouseCoopers’ (PwC) internal audit services practice has extensive experience in assisting audit committees, chief audit executives and management in ensuring internal audit quality and effectiveness. Our experience is that quality must be considered from three viewpoints:
Effectiveness in meeting the needs of stakeholders;
Efficiency and effectiveness in the use of the latest internal audit best practices; and
Effectiveness in complying with applicable professional and/or regulatory internal audit standards and requirements.

Internal audit must address all three dimensions to be considered highly effective in today’s challenging

To help organizations evaluate and enhance internal audit quality and effectiveness, PwC has developed two models that are useful in helping organizations to envision, structure and operate the most effective internal audit function to meet and exceed stakeholder expectations:
Internal Audit Framework and
Internal Audit Operating Model.

Internal audit tools Print-friendly version
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Profiler: Internal audit benchmarking tool

An integral part of our review methodology includes the use of Profiler, PricewaterhouseCoopers’ (PwC) unique, trusted benchmarking tool.

Profiler provides definitions for 11 key internal audit value drivers to ensure a common understanding. These value drivers have been identified during actual reviews of other internal audit departments performed by PwC. The tool is flexible, allowing us to assign relative importance to each value driver applicable.

The concept behind Profiler is not to benchmark your internal audit function in comparison to predefined best practices. Rather, we use it to measure your current internal audit processes against what should be best practices for your department given the value drivers identified.

In other words, what we determine to be the best practices will depend on your organization’s culture, ethical values, size, stakeholders’ objectives, and risk management priorities. In addition, through our work with leading internal audit organizations, we have learned that a “best practice” at one organization may be inappropriate at another.

Some of the key features of profiler are that:
It is based on the PwC internal audit framework™;
It is comprised of an Internal Audit best practices library and best practices benchmarking tool for assessing internal audit department performance;
Benchmarking industry scores are based on high performing internal audit departments;
Benchmarking is performed only by experienced Advisory services professionals; and
Content is controlled by knowledge managers experienced in assessing internal audit departments.
IIA compliance tool

We maintain a proprietary electronic tool –– PwCs’ IIA compliance tool –– that contains the professional standards set forth by the IIA and related testing procedures to evaluate compliance of internal audit departments with the IIA standards.

We use this tool to review internal audit’s compliance with the standards and identify potential areas for improvement.

The internal audit framework™ Print-friendly version
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PricewaterhouseCoopers’ internal audit framework provides a strategic model for internal auditors and their stakeholders to understand the relationships and linkages necessary to achieve a high quality and effective internal audit function.

The framework explores:

The relationship between stakeholders’ expectations and the organisation’s risk management priorities;
The difference between the mission of internal audit and its “value drivers”;
How value drivers provide the filter for determining the most appropriate internal audit practices for an organisation;
How core internal audit processes must be aligned with the internal audit mission and value drivers, and
How both planning and performance measurement must be directly driven by the value drivers and wrap around the core internal audit processes

The PricewaterhouseCoopers internal audit operating model™ Print-friendly version
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The PricewaterhouseCoopers internal audit operating model depicts the choices from which organizations and stakeholders often choose in determining the value focus of internal audit and the corresponding supporting internal audit skill sets. The model depicts a dynamic process. In the current environment, organizations are shifting across the spectrum and adjusting as they seek to achieve focus for their current issues.

The model demonstrates the importance of a clear understanding by stakeholders of where the focus of internal audit should be at any point in time. In today’s environment, even internal audit functions that are adept at adjusting to changing business needs must periodically recalibrate and reconfirm value expectations.

Also, the model:
Displays the relationship between the various functional focus points and related internal audit skill sets;
Reveals that, as the value focus shifts across the spectrum, the corresponding skills sets and operating practices of the function must also change, and
Proves that development of relevant skill sets can present a significant challenge to internal audit functions.

The PricewaterhouseCoopers approach to assessing internal audit quality and effectiveness Print-friendly version
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Increasingly, audit committees and management are looking for objective feedback on the effectiveness of their internal audit functions. This demands a structured approach and methodology as well as in-depth knowledge of internal audit practices and processes.

The PricewaterhouseCoopers (PwC) approach to assessing internal audit quality and effectiveness includes a four-phase plan that follows the Internal Audit Framework.

Phase 1, project planning
Includes defining the specific objectives, stakeholders and deliverables. Key to this phase is a clear and tailored set of objectives for the project overall. For many organizations, the deliverable will include not just a report on internal audit but an action plan to address any gaps noted.

Phase 2, value driver identification
Includes interviews and surveys to gain insight and understanding of both the value drivers of internal audit stakeholders and perceptions of current performance.

Phase 3, current state assessment
Includes detailed reviews and analysis of internal audit’s core processes. In this phase, Profiler™, PwC’s proprietary internal audit best practices benchmarking tool, is used to assess and benchmark the practices of an internal audit function. More importantly, Profiler also enables the identification of other possible best practices that may fit the specific value drivers of the organization. This phase also includes assessments of compliance with applicable professional standards.

Phase 4, solution development
Includes the development of not only a report of findings and observations, but an action plan to implement the specific recommendations that appear to offer the highest value to the organization