An improved process model for internal auditing

Abstract

PurposeTo investigate and understand the reasons why internal auditing is often perceived to not add value. This paper describes the development of a new process model and approach that will improve the actual and perceived value of auditing.Design/methodology/approachProcess analysis, identified areas of potential inefficiency and conflict. The literature review identified the standards and guidance that influence the way internal auditing is managed and its current trends. A questionnaire was sent to auditors and auditees at AWE Plc., to gain their views on audit effectiveness and quantify their perception of value.FindingsQuestionnaire results show variations in the perceived value of internal auditing, particularly of some key stages in the process. The management of internal auditing is too focused on programme achievement, not the resulting value from improvement action.Research limitations/implicationsThe new process model has yet to be tried in practice, and this identifies an area of future research. It is envisaged that some additional audit preparation would be required, and the time taken to conduct an audit may also increase slightly. The financial benefits quoted by applying the new model would be estimated and may require some justification.Practical implicationsThe new model should improve audit effectiveness and its perceived value as the focus changes from simply undertaking an audit, to demonstrating its actual financial value. It has the potential to significantly influence the way both internal and external auditing is conducted in the future.Originality/valueThe improved process model and cost‐benefit audit methodology approach was found to be unique within the scope of the literature review.

Exploring Variability Among Quality Management System Auditors When Rating the Severity of Audit Findings at a Nuclear Power Plant

“…When an auditor is aware of their predominant thinking style, they can guard against the pitfalls and bias related to the specific type of thinking. This can ultimately change an auditor's mental attitude and lead to enhanced auditor objectivity, as noted by Caputo [4], citing Stanovic and West (2000).…”

“…Supporting this, Elliot et al [4] emphasised that when audits are performed by auditors who are unaware of the risk impact of a particular process on the organisation; who accept shortcomings in the scoping of audits; and who fail to consider previously raised nonconformities, this all impacts on the effectiveness of the audit's execution. Similarly, Mohamed and Habib [8], and Fadzil, Haron and Jantan [9] argued that audit quality hinges on fully independent auditors who are confident to share all aspects of the audit findings and process with the auditee.…”

“…The dissection of auditee perception relating to audit effectiveness by Elliot, Dawson and Edwards [4], returned the view that audits can be seen in a negative light -not necessarily based on audit execution performance, but rather on perceptions held by auditees. This is evident when managers and auditees consider audits as mandatory exercises with very few or no positive benefits.…”

“…Elliot et al [4], citing both Beckmerhagen, Berg, Karapetrovic and Willborn. (2004) and Walleans (2000), highlighted specific challenges related to formulating audit findings.…”

“…Elliot et al [4], citing Roth (2000), found that the value of the audit process improves through communication and marketing, and by gaining the auditee's support. Similarly, Rajendran and Devadasan [7] supported the notion of communication and marketing, and emphasised the need to determine the expectations of the audit customer by soliciting the necessary feedback from stakeholders.…”