Too few companies seeking independent assurance as they navigate Brexit risks, says new survey

18 August 2016

A new survey by the Chartered Institute of Internal Auditors shows that while 91% of organisations are now making plans to operate in a Brexit environment, only 42% of internal audit teams have been asked to evaluate how risks to those plans are being managed. The survey, which received responses from heads of internal audit in 220 organisations spanning all sectors, also shows that half of respondents are engaged in providing advice and insight into risk and control issues relating to Brexit.

The single risk of most concern to private sector organisations, according to the Institute’s survey, are worries about volatility in the financial markets, where more than two thirds (69%) of respondents to a question about their most pressing concerns ranked this aspect highest.

Liz Sandwith, Chief Professional Practice Advisor at the Institute, says that in many organisations, Brexit wasn’t on internal audit’s radar. She said:

“Internal audit teams will already have had their annual audit plans in place, and they may not have seen a reason to incorporate Brexit into them, given the general feeling before the referendum that a Remain vote would prevail. Indeed, three in five of the organisations didn’t make any Brexit contingency plans before the vote.”

“The number of internal auditors currently providing assurance is below my expectations, given that boards should be seeking assurance on the different dimensions of risk facing their organisations, such as exchange rate volatility. But it is encouraging that nearly half (48%) of respondents are giving advice on such risk exposures. Activity levels will be higher where organisations use a risk-based approach to internal auditing, deploying internal audit resources flexibly to agreed areas of greatest risk at any one time, rather than carrying out audits on a cyclical basis.”

Dr Ian Peters, Chief Executive of the Chartered Institute of Internal Auditors said:

“Internal auditors have a key role to play in supporting organisations to design and implement strategies to navigate Brexit risks. What the post-Brexit environment will look like is still very unclear: but as companies form their projects and plans, internal auditors will need to develop a concrete audit response to give boards the assurance they need.”


Notes for editors

Online survey conducted in July 2016, after the Brexit Vote results announced. 220 responses from heads of internal audit in organisations across all sectors (including 17 responses from the Republic of Ireland).

Key findings

  1. Most organisations (61%) didn’t make contingency plans prior to the vote…
  2. Even though most (83%) said their organisations would be affected by a vote to leave.
  3. In particular, private sector organisations were concerned about volatility in the currency markets (69%), regulatory change (56%) and consumer and business confidence (47%).
  4. But since the vote to leave, 91% are now making plans to operate in the new environment.
  5. However, despite the fact that organisations are now making plans, 58% of internal auditors say they are not involved in providing assurance on the risks related to these plans.
  6. This may be because annual audit plans are already in place: or because organisations’ own plans are not sufficiently advanced for internal auditors yet to be providing assurance on them.
  7. On the other hand, a significant number (48%) are being consulted to provide advice and insight on risk and control aspects of those plans.

Observation

It is a sign of the progress and development of the internal audit profession that nearly half of respondents to our survey appear to be involved in the early stages of the planning of Brexit strategies, providing advice to senior teams on the management of Brexit-related risks - even if fewer are yet being asked to provide assurance on plans.

About the institute

The IIA has been leading the profession of internal auditing since 1948 and became the Chartered Institute of Internal Auditors on 1st October, 2010. It is the only body focused exclusively on internal auditing. Its International Standards and Code of Ethics bind a global community of over 180,000 internal auditors in 170 countries and over 8,700 members in the UK and Ireland.

Internal Auditors help protect the organisations they work for by assessing whether all significant risks are properly identified, controlled and reported to the board, usually via the audit committee; and by challenging executive management to improve the effectiveness of governance, risk management and internal controls.

Read the survey results