Effective Sizing of Internal Audit Departments

  • Item No. : 5013
  • ISBN : 978-0-89413-688-7
  • Publisher : The IIA Research Foundation
  • Publish Date : November 2010
  • Authors : Urton L. Anderson, Ph.D, CIA, CCSA, CFSA, CGAP
    Margaret H. Christ, Ph.D, CIA
    Karla M. Johnstone, Ph.D
    Larry Rittenberg, Ph.D, CIA
  • Media : Paperback
  • Page count : 80
  • Dimensions : 7x10
  • Member Price : $25.00
  • Non-Member Price : $35.00

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How much of a company’s resources should be allocated to the function of internal auditing?  It is widely accepted that internal auditing is a key element of internal control, and regulators and stock exchange requirements demand the presence of internal auditing for registered companies. Yet, companies often struggle to know whether the investments they make in resource allocations for internal auditing are appropriate and effective. 

The purpose of this research is to develop a conceptual model of internal audit effective-sizing.

Not all internal audit departments are the same, nor do they have the same mission within their companies.  Therefore, simply comparing the size of one internal audit department with another – even in the same industry and the same relative size of company – can give misleading indications as to the appropriate size of an internal audit department. 
 
This study led to development of a conceptual model of internal audit effective-sizing that articulates the key factors that may be tailored to each company’s unique characteristics, mission, personnel, and quality profile. It examines seven critical factors that determine the size of an internal audit department:
  1. Characteristics of the company,
  2. Characteristics of the governance structure of the company,
  3. The mission of the internal audit department as seen by management, the audit committee, and the internal audit department,
  4. The internal audit value proposition as executed by the internal audit department,
  5. The alignment of internal audit with management and audit committee expectations,
  6. Various characteristics of the internal audit department (e.g., staffing), and
  7. Internal audit service quality.
This model will help organizations better allocate their resources and reflect better alignment between management and audit committee values for internal audit and the delivery of value added activities.
 
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