Internal audits should not be made mandatory
as that would increase the chance of it becoming an inefficient
box-ticking process, internal auditors told a House of Lords
Economics Affairs Committee inquiry this week.
Institute of Internal Auditors member Sarah
Blackburn said that making internal audit compulsory could decrease
its value in the market.
“We can’t do internal audits on the basis of
cost as that can lead to poor quality,” Blackburn said.
Institute of Internal Auditors chief executive
Ian Peters said more than 90% of FTSE 350 companies have internal
auditors and audit committees.
“By regulating it only makes it a box-ticking
process and it doesn’t say anything about audit quality and
effectiveness,” Peters said.
When asked about the effectiveness of internal
audits, the witnesses said there is a clear need for new expertise
among internal auditors, audit committees and risk
committees. “Internal auditors have to understand where the
business is going and where it suppose to be going and have a broad
strategic understanding in order to ask the right questions from
the board and management,” Blackburn said.
In terms of internal auditor independence,
Aviva non-executive and former KPMG chairman Lord Sharman said
internal auditors will never be independent, but they have to be
objective.
The witnesses expressed serious concerns over
external auditors conducting internal audits.
