External Quality Assessment Review of Internal Audit Function

In any organization, the internal audit function is essential to its operations. It evaluates the company’s internal controls, risk management practices, and financial reporting processes. The internal audit function aims to help the organization achieve its objectives by providing assurance and consulting services. An external quality assessment review is necessary to ensure that the internal audit function is performing effectively and efficiently. In this article, we will discuss the external quality assessment of the internal audit function.

What is an External Quality Assessment Review?

An external quality assessment evaluates the internal audit function conducted by an independent and objective third-party organization. It assesses the internal audit function’s conformance with the International Standards for the Professional Practice of Internal Auditing (Standards). The review evaluates the effectiveness of the internal audit function in fulfilling its responsibilities, achieving its objectives, and contributing to the organization’s success.

Why is an External Quality Assessment Review Necessary?

An external quality assessment review is necessary for several reasons:

1. It objectively evaluates the internal audit function’s performance.
2. It helps identify improvement areas in the internal audit function’s processes, practices, and methodologies.
3. It enhances the internal audit function’s credibility and demonstrates its value to its stakeholders.

What are the Steps Involved in an External Quality Assessment Review?

An external quality assessment typically involves the following steps:

1. Planning and Preparation

The first step in an external quality assessment review is planning and preparation. The external reviewer reviews the organization’s internal audit policies, procedures, and methodologies to develop an understanding of the internal audit function’s operations. The reviewer also identifies key stakeholders and sets the scope of the review.

1. Fieldwork

The second step is fieldwork, where the external reviewer assesses the internal audit function’s activities. This involves conducting interviews with key stakeholders, reviewing internal audit reports, and evaluating the internal audit function’s compliance with the Standards.

1. Reporting

The third step is reporting, where the external reviewer prepares a report detailing the findings of the external quality assessment report. The report includes recommendations for improving the internal audit function’s performance and processes.

1. Follow-Up

The final step is the follow-up, where the internal audit function implements the recommendations outlined in the report. The external reviewer may conduct a follow-up review to evaluate the effectiveness of the internal audit function’s implementation of the recommendations.

What are the Benefits of an External Quality Assessment Review?

An external quality assessment report provides several benefits, including:

• Enhanced credibility of the internal audit function
• Identification of areas for improvement in the internal audit function’s processes, practices, and methodologies
• Improved efficiency and effectiveness of the internal audit function
• Demonstrated the value of the internal audit function to the organization’s stakeholders
• Assurance that the internal audit function is complying with the Standards

An external quality assessment evaluation of the internal audit function is essential to an organization’s internal audit process. It provides an objective evaluation of the internal audit function’s performance and identifies areas for improvement. The review enhances the internal audit function’s credibility and demonstrates its value to its stakeholders. The external quality assessment review ensures that the internal audit function complies with the Standards and contributes to the organization’s success.

Who conducts the external quality assessment evaluation?

An independent and objective third-party organization conducts the external quality assessment review.

What is the purpose of the external quality assessment report?

The purpose of the external quality assessment review is to evaluate the effectiveness of the internal audit function in fulfilling its responsibilities, achieving its objectives, and contributing to the organization’s success.

How often should an external quality assessment evaluation be conducted?

An external quality assessment evaluation should be conducted at least once every five years, as per the Standards.

Can the internal audit function conduct its quality assessment review?

No, the internal audit function should not conduct its quality assessment review. An external reviewer should review to ensure objectivity and independence.

What happens after an external quality assessment review?

After an external quality assessment review, the internal audit function implements the recommendations outlined in the report. The external reviewer may conduct a follow-up review to evaluate the effectiveness of the internal audit function’s implementation of the recommendations.

What are the benefits of an external quality assessment report?

An external quality assessment report assures that the internal audit function is operating effectively and efficiently. It also helps identify improvement areas and provides recommendations for enhancing the function’s performance. Furthermore, an external review enhances the credibility of the internal audit function with stakeholders and demonstrates the function’s commitment to quality and continuous improvement.

What are the potential challenges of an external quality assessment evaluation?

One potential challenge is the cost associated with hiring an external reviewer. Another challenge is the time required to prepare for and participate in the review process. Additionally, the external reviewer’s recommendations may require significant changes to the internal audit function’s processes and procedures, which can be difficult to implement.

How can internal audit functions prepare for an external quality assessment review?

Internal audit functions can prepare for an external quality assessment review by conducting a self-assessment and addressing any identified weaknesses before the external report. They can also ensure that all policies and procedures are current and that the function complies with the Standards. Additionally, the internal audit function should communicate with the external reviewer to ensure a clear understanding of the scope and objectives of the review.

What should stakeholders expect from the results of an external quality assessment review?

Stakeholders should expect a comprehensive report outlining the strengths and weaknesses of the internal audit function, as well as recommendations for improvement. The report should ensure that the internal audit function is operating by the Standards and meeting stakeholders’ expectations.

How can internal audit functions use the results of an external quality assessment report to improve their performance?

Internal audit functions can use the results of an external quality assessment report to identify areas for improvement and develop action plans to address any identified weaknesses. They can also use the recommendations provided in the review report to enhance their policies, procedures, and processes. Furthermore, the internal audit function can use the review to demonstrate its commitment to quality and continuous improvement to stakeholders.

Disclaimer: The purpose of this publication is to create awareness and has been written in general terms. This publication is not for any specific situation and therefore no opinion should be drawn from it for any particular circumstances. Limitless Consulting recommend that the reader of this publication should refer to the official documents referred in the document, seek appropriate professional advice for any particular situation and accepts no liability for any loss as a result of any information mentioned in this publication.