A record 250 delegates attended the Conference this year, which returned to the Royal Society of Medicine venue in the West End of London.

Institute chief executive, Dr Ian Peters opened the conference. He set the scene by talking about the increasing focus on the need to get the “tone at the top” right within organisations. Supporting that aim was a key strategic role for internal audit, he said. Whilst regulators and policy makers particularly in the banking sector, were becoming less “light touch”, rules alone cannot fundamentally change behaviour”, he said. “Good corporate governance is fundamentally about behaviour.” Supporting the greater interest in risk management and strong corporate governance was the key challenge for internal audit, said Peters. To achieve it, internal audit needs a higher profile and greater influence amongst its many stakeholders within organisations and more widely. Referring to recent Institute research amongst non-executive directors, he said there is still a long way to go to ratchet up the level of understanding of risk management within organisations and Internal audit had an important role to play here.

 

Under a theme of “Driving Business Value”, the first morning of the event was designed to get a range of perspectives on how that role is becoming more important.
A representative of senior executive management the non-executive audit committee chair accepted invitations to speak to the profession.

Jann Brown, managing director and chief financial officer at Cairn Energy PLC, focused on the importance of internal audit as a strategic business partner. She emphasized the need for organisations to combine top class corporate governance with top class business performance. “Internal audit needs to be very much part of that”, she said. But she said that internal audit can only be truly effective if it really understands the business, its external environment, its internal culture and its key risks. Indentifying internal audit’s added value, Brown said, “it takes internal audit to understand where risk really lies”. But internal auditors need to be able to report more than just what the business is not doing right. “I want to know why it is not going right and what the solutions might be”, she said. The underlying reasons are crucial. Understanding them and how to resolve them is internal audit’s added value.”
“And It is possible to be engaged with the business without compromising independence - I have seen it done”, she added.

As a managing director and chief financial officer, Brown said she wanted internal audit’s help with three things: An up to date risk register; An internal control system that is operating effectively; And assurance that risk management improvement is part of any organisation’s culture. Positioned as a partner to the business, internal audit can deliver this.
 

 

But, how easy is it for internal audit to achieve this positioning?
Colin Day, Audit Committee chair at AMEC PLC was blunt in his answer. Whilst he would like internal audit to be positioned as a strategic partner to the business, he thought internal audit had a long way to go to achieve it. Internal audit is perceived as being concerned with internal financial control. Management wants you to keep the numbers right and keep the company honest, he told delegates.

The chief internal auditor at Citigroup was next to give his perspective. Dr Marc Carawan’s approach to positioning internal audit is to ensure a good understanding of the expectations of his stakeholders. He establishes agreement on what good assurance looks like. He said that it was important for internal audit to mirror the business, positioning key internal auditors to interface with key stakeholders. “If the risks are in the business, then internal audit should be close to the business”, he said.

The three guest speakers came together for a panel discussion to conclude the first morning. They quickly found themselves engaged in a debate about whether “internal audit” was the right name for the assurance function, in terms of positioning it as a partner to the business. A number of alternatives were offered from delegates. One example aligned internal audit with “business improvement”. There was also discussion about internal audit’s added value. A number of views were expressed about what that meant. One delegate’s suggestion that it meant, “actively engaging with management to find improvements as well as highlighting weaknesses in the system”, seemed to meet with the approval of most delegates.

This sentiment was reflected when the head of the National Audit Office ( NAO), Amyas Morse, discussed his views on internal audit later on the first day of the conference. His emphasis is not on finding fault but driving improvement, he explained. His organisation reports on public spending of £950bn per year, the effectiveness of which it asses through nearly 500 audits of public bodies each year. He said the key challenge was to ensure that the enormous change underway within government departments was both strategically driven and properly controlled. Consequently there has never been a more important time for internal audit. “Internal audit is a key part of understanding how change is being managed and risks controlled”, he concluded.  Morse said that there was a common purpose between internal audit and the NAO on which he wanted to put greater reliance.

Incoming Institute president Dave Reynolds opened the conference’s second day. He commented on the extent to which internal audit was raising its profile. “Whilst we don’t necessarily seek the limelight we must be highly visible within our organisations from top to bottom, if we want to be truly influential, he said. He noted the institute’s progress in supporting practitioners’ in that quest and in representing the profession to its external stakeholders. This would be a focus of his forthcoming year as president, he said.

 

  

  

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