a view of the future – internal audit


By Simon Maddocks, Head of Governance, London Borough of Croydon

“It was the best of times; it was the worst of times…….” Although this was penned by Charles Dickens as the opening to his book A Tale of Two Cities over 150 years ago, it sums up the outlook for the internal audit profession here and now.

We are all well aware that the current economic climate and government policy are reducing the resources of our organisations to the point where it hurts and many of our audit services are shrinking as a result. This is happening to an extent not seen before in living memory and it is forcing us as a profession to examine the way that we work and to more urgently seek answers to the questions “how much work do I need to do to give my annual opinion” and “how do I show that I add value to my organisation”.

While this is happening new initiatives abound, such as welfare reform, partial retention of NNDR, council tax support, academies, social value, local audit, re-organisation of the NHS, etc, etc. These are all testing the internal control environment of our organisations as well as the relationships with partners, service users, external auditors and other stakeholders. We now all need to adopt new and innovative ways of gaining assurance over the interactions that we have with others and how the money is spent for which our organisations are accountable. Never has our role been more important or more difficult.   

At the same time, the recognition of internal audit as a profession in the public sector is improving strongly. The IIA’s achievement of Chartered status and its closer working relationship with CIPFA are helping to achieve that. The calibre of people entering the profession is also generally improving, a trend that has been on-going for a number of years. Browsing job adverts (admit it, we all do it) nearly all require a professional qualification and some want degrees and MBAs as well. My only slight concern with that is the need to remember that life and work experience are also valuable additional qualifications for our profession.

The implementation in April this year of the Public Sector Internal Audit Standards (PSIAS) is finally recognition that a common definition and standards are necessary, regardless of which part of the public sector you work in. The PSIAS are based on the international standards of the IIA with minor clarifications and requirements added to make them suitable for the non-corporate world. The adoption of these standards by CIPFA on behalf of local government, The Treasury for central government, the Department of Health for the NHS and the three devolved governments sends out a clear message that this is an important development in our profession.  Whether you operate an in-house, outsourced, co-sourced or shared service internal audit, these standards apply equally and this may take some thinking about when implementing, reviewing, improving and reporting on your compliance.

The reporting lines of the internal audit function have always courted controversy; for example should it be to the Chief Executive or the Director of Finance. As organisations shrink and change, reporting lines are changing for reasons of expediency rather than good governance and I’m not sure that this matters. The important element is where you get heard. All of the time you have regular access to your Corporate Board (or equivalent) and to the Audit Committee and can speak to the Chief Executive and Directors when you need to, then you will have the influence that you need regardless of where you sit in the organisation’s structure.

It’s an exciting time to be an internal auditor in the public sector. Change and innovation are the norm. We may never be as highly paid as some other sectors, but the job satisfaction can be immense. We will continue to rise to the challenges that are presented to us and provided we demonstrate that we add value to our organisations, this will continue to be a well regarded profession.