An improved process model for internal auditing

Abstract

PurposeTo investigate and understand the reasons why internal auditing is often perceived to not add value. This paper describes the development of a new process model and approach that will improve the actual and perceived value of auditing.Design/methodology/approachProcess analysis, identified areas of potential inefficiency and conflict. The literature review identified the standards and guidance that influence the way internal auditing is managed and its current trends. A questionnaire was sent to auditors and auditees at AWE Plc., to gain their views on audit effectiveness and quantify their perception of value.FindingsQuestionnaire results show variations in the perceived value of internal auditing, particularly of some key stages in the process. The management of internal auditing is too focused on programme achievement, not the resulting value from improvement action.Research limitations/implicationsThe new process model has yet to be tried in practice, and this identifies an area of future research. It is envisaged that some additional audit preparation would be required, and the time taken to conduct an audit may also increase slightly. The financial benefits quoted by applying the new model would be estimated and may require some justification.Practical implicationsThe new model should improve audit effectiveness and its perceived value as the focus changes from simply undertaking an audit, to demonstrating its actual financial value. It has the potential to significantly influence the way both internal and external auditing is conducted in the future.Originality/valueThe improved process model and cost‐benefit audit methodology approach was found to be unique within the scope of the literature review.