The IIA introduced the concept of certification for the internal audit function in- A number of individuals globally have achieved certification, and this does
help in setting certain standards for auditing. However, there are a significant num-
ber of internal auditors in the world who are not members of the Institute, have not
taken any audit courses, and do not understand financial statements. Does that make
them inadequate auditors? It depends on how they are being used in the function. It
is important that management understand the internal audit responsibilities and the
importance of independence in executing those functions.
It is to be hoped that the CFIA project will help in defining the competency re-
quirements at various levels—entry, experienced, and manager. This will help pro-
vide guidance to schools in developing appropriate courses toward a degree or spe-
cialization in internal auditing.
32.8 EVALUATING THE INTERNAL AUDIT FUNCTION. Evaluation of the internal
audit function is not easy. The head of the function should spend some time with
management early on and agree on what are the criteria for success. A balanced
scorecard approach, which combines some financial as well as project-driven meas-
ures, should help. There should exist an ability to bring in outside evidence for com-
parison with others in the industry. One option is to ask independent accountants to
evaluate how well the internal audit function is being performed. Other options in-
clude relying on the IIA guidelines or hiring qualified members of the Institute to
evaluate the internal audit function. A common drawback of all these approaches is
that if management still does not believe in the quality of the function, outside evi-
dence is not that helpful. The recognition of the internal audit function as “the best”
by external peers will not always convince management. The use of external auditors
to evaluate internal auditors may have drawbacks. Until recently, many external au-
ditors did not understand the full scope of what the internal auditors should be doing.
If the internal auditors were not doing what the external auditors were doing, the ex-
ternal auditors tended to give a negative review of the work performed by the inter-
nal auditors. In many cases, such reviews focused more on the documentation and
training process rather than on the outcome of their work. External auditors, being
acutely aware of how the lack of clear documentation processes has hurt in litigation,
tend to spend more time refining the process than focusing on the outcome of the
work of internal auditors.
Using a peer internal audit function in the evaluation process has a number of
pluses. One is that the profession is evaluated on factors they should be evaluated on.
Second, peers tend to be a friendlier audience, although this approach still does not
help to overcome the gulf between management and the internal auditors.
In 1986, IIA established the Quality Assurance Review Service (QARS) with the
object of providing internal audit directors with the assurance that they were in com-
pliance with standards. A quality assurance review is conducted by volunteer mem-
bers of the IIA. They receive training at headquarters in Altamonte Springs, Florida,
prior to conducting their reviews. The average duration of a quality assurance review
of an internal audit department is about one week.
32.9 VIEWS OF INTERNAL AUDITING MUST CHANGE. Management’s views of
internal audit in general are guarded. Too many business managers do not appreciate
the way their various business units can work with the internal auditors and tend to
view the latter as a necessary evil. A game develops wherein managers do not com-
32 • 12 INTERNAL AUDITING