Distinguished guests, partners and sponsors, fellow members of the Chartered Institute, ladies and gentlemen, it is very good to see you all here in the splendid and historic setting of the Guildhall’s Great Hall for this event, which is a highlight of the Institute’s year.
It is my great privilege to be President of the Institute and I am very grateful to have been given the opportunity. During the course of the year I have had the opportunity to address several gatherings of members, but this is by far the largest number of members I have seen in one location. In fact, we have record numbers attending this year’s dinner.
Under Ian’s leadership over the past seven years, the reputation of the profession and the financial position of the Institute have both improved considerably. But your Council feels that there is still a considerable unexploited opportunity for both the profession and the Institute to go further and faster – and we decided to have a go at making that happen.
At last year’s AGM I set out the two propositions which I intended to put at the heart of my year as President:
Since the AGM we have been road-testing these propositions at various meetings of members and I am pleased to report that they have been very well-received. The Council and the senior staff of the Institute, led by Ian, have been developing these ideas into a refreshed vision which we believe will communicate more effectively the value added by internal audit professionals and the value added by the Institute.
We need to make progress on both the demand and supply sides of two separate – but related – markets: the market for internal audit services supplied by practitioners and the market for the services supplied by the Institute. We would like there to be greater demand for internal audit services and for that demand to be met by an increased supply of professional internal auditors; we would like this in turn to lead to an increased demand for the services provided by the Institute which will require an increase in the capability of the Institute to supply those services.
There are four key ideas at the heart of our new vision:
First, we would like greater recognition of how internal audit adds value to its customers, i.e. the senior leaders of organisations, both executive and non-executive. These senior leaders have the primary influence on the demand for internal audit services – they control the budgets and the other, softer factors which influence the effectiveness of internal audit. So we need to have a clear message for them: how internal audit can help them to be more successful in meeting the onerous responsibilities for which they are personally accountable.:
We would also like there to be a sharper recognition of how internal audit can add value to other key stakeholders, particularly those who are guardians of the public interest, such as regulators. We have made considerable progress in recent years with the financial sector regulators – and we are very grateful to John Griffith-Jones for being with us here this evening – but I believe that there is scope for internal audit to contribute in a cost-effective way to the goals of the regulators in the many other parts of UK activity which are regulated.
Second, we would like there to be a greater appreciation of the value of professionalism in internal audit: internal audit is a good thing – but professional internal audit is even better! The key characteristics of a profession – a common body of knowledge, standards, a code of ethics and disciplinary arrangements – are well-established and they apply equally to the internal audit profession.
This does not mean that the profession should be exclusive – the ability for people with a variety of backgrounds to rotate in and out of internal audit is one of its strengths – but we think that it should be increasingly common for the leader of significant internal audit teams to be a professional internal auditor, as evidenced by membership of this Institute.
The intended outcome is for an increase in the demand for internal audit. The Institute will continue to help make the case, but it is individual members, acting as the front-line salesforce for the vision, who can make the greatest difference.
Thirdly, we need a sharper focus on how the Institute can add value to its members and customers – overlapping but not identical groups, as many of our customers are non-members – and to its wider stakeholders. We think that there is an unexploited opportunity for us to do more, to provide more services to more members and to more non-members.
Finally, we acknowledge that the Institute as an organisation needs to ‘up its game’ if it is to make its contribution in increasing the demand for internal audit services and to meet the demand for increases in its services.
Ian and the Council are determined to create a commitment to excellence across the Institute’s activities to ensure that they are fit for purpose for a fast-moving and increasingly digital world. The reality is that this will require skills, processes and technology that we currently do not have and, in the coming months, Council will be evaluating Ian’s proposals for investment in these areas.
The intended outcome is for an increase in the demand for the Institute’s services: for individual internal auditors who currently not members of the Institute to become members, and for those who are to make more use of the services which the Institute has to offer.
One example of where the Institute has sought, in the public interest, to increase the demand for internal audit services and to improve the quality of the supply has been the ‘Code for Effective Internal Audit in the Financial Services Sector’, which we published in 2013.
During the past year, the Code has been reviewed by an independent committee under the chairmanship of Mike Ashley, Chairman of the Audit Committee of Barclays.
The Committee published its interim report in April. It has concluded that the Code has generally been well-received and effective, but that it could benefit from some amendments to its wording and that it would be helpful if the Institute were to produce implementation guidance on some topics.
The consultation on the proposed amendments has just closed and it is expected that the revised Code will be published over the Summer. We are very grateful to Mike and his colleagues for their work.
I would also observe that although the Code is targeted at the financial services sector, its messages about the scope, skills and status of effective internal audit functions are more broadly applicable.
A another recent example of how the Institute has sought to increase the demand for internal audit services and to help internal audit practitioners respond to that demand is related to cyber security.
The Institute has published a board briefing on cyber security to enhance board members’ awareness of how internal audit can help ensure that this important risk is adequately managed. At the same time we published accompanying technical guidance for internal auditors, giving them more detailed information on cyber risks, the sorts of controls which might be applied to manage the risk, and approaches to reviewing the effectiveness of those controls.
Taken together these two documents provide an example of the Institute influencing both the demand and supply sides of the market for internal audit services.
A crucial conclusion is that the refreshed vision can only be achieved as a result of the combined efforts of the Institute and its members.
I have spoken to many internal auditors in recent years, both in the UK and in other countries, and I have been very impressed by the level of enthusiasm for the profession and by the collegiate nature of the profession – internal auditors are very generous in giving their time and sharing ideas.
We will need more of that expertise and enthusiasm in the coming years and we are looking to expand the opportunities for members to make a contribution to the Institute’s work.
A specific illustration of how individual members can help relates to the ‘more Institute’ proposition.
The most significant lever for the ‘more Institute’ proposition would be for us to have more members. The Institute’s membership has been growing at a compound annual rate of over 5% in the past five years, but, frankly, we would like to increase that rate. Reliable statistics are hard to obtain, but we know that there are far more practising internal auditors in the UK & Ireland than there are members of our Institute. The Institute will continue to help make the case, but it is existing members, acting as front-line recruiters, who can make the greatest difference.
It has been marvellous to nearly fill this majestic hall… but I look forward to the year when we outgrow it!