Nine Elements Required for Internal Audit Effectiveness in the Public Sector

8/12/2019 Nine Elements Required for Internal Audit Effectiveness in the Public Sector

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R E S E A R C H R E P O R T

Nine Elements Requiredfor Internal Audit

Effectiveness in the

Public Sector


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Nine Elements Requiredfor Internal Audit

Effectiveness

in the Public SectorA Global Assessment Based onTe IIAs 2010 Global Internal Audit Survey

A Part of Te IIAsGlobal Internal Audit Common

Body of Knowledge (CBOK) Project

and

Te IIAs Supplemental Guidance:Te Role of Auditing in Public Sector Governance,

2nd Edition

Elizabeth MacRae, CGAP

Diane van Gils, PhD


3/49Nine Elements Required for Internal Audit Effectiveness in the Public Sector 3

Copyrigh 2014 by he Insiue of Inernal Audiors Research Foundaion (IIARF).

All righs reserved.

Published by he Insiue of Inernal Audiors Research Foundaion247 Mailand Avenue

Alamone Springs, Florida 32701-4201

No par of his publicaion may be reproduced, sored in a rerieval sysem, or ransmied in any formby any meanselecronic, mechanical, phoocopying, recording, or oher wisewihou prior wrienpermission of he publisher. Requess o he publisher for permission should be sen elecronically o:

[email protected] w ih he subjec line reprin permission reques.

Limi of Liabiliy: he IIARF publishes his documen for informaional and educaional purposes and isno a subsiue for legal or accouning advice. he IIARF does no provide such advice and makes no

warrany as o any legal or accouning resuls hrough is publicaion of his documen. When legal oraccouning issues arise, professional assisance should be sough and reained.

he Insiue of Inernal Audiors (IIAs) Inernaional Professional Pracices Framework (IPPF) compris-

es he full range of exising and developing pracice guidance for he profession. he IPPF provides guid-ance o inernal audiors globally and paves he way o world-class inernal audiing.

he IIA and he IIAR F work in parnership wih researchers from around he globe who conduc valuablesudies on criical issues affecing odays business world. Much of he conen presened in heir finalrepors is a resul of IIARF-funded research and prepared as a service o he IIARF and he inernal audiprofession. Expressed opinions, inerpreaions, or poins of view represen a consensus of he researchersand do no necessarily reflec or represen he official posiion or policies of he IIA or he IIARF.

ISBN-13: 978-0-89413-881-2

19 18 17 16 15 14 1 2 3 4 5 6 7 8 9


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4The IIA Research Foundation

CONTENTS

Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Section 1 Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Mapping the Global Survey Responses into the Nine Key Elements . . . . . . . . . . . . . . . . 8

How to Use This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Section 2 Characteristics of Public Sector Respondents . . . . . . . . . . . . . . . . . . . . . . . . 9

Individual Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Organizational Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Other Contextual Characteristics of the Organization . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Section 3 Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Element #1 Organizational Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Element #2 A Formal Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Element #3 Unrestricted Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Element #4 Sufficient Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Element #5 Competent Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Element #6 Objective Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Element #7 Competent Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Element #8 Stakeholder Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Element #9 Professional Audit Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Section 4 Summary and Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Opportunities for Overall Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Appendix A Regional Scores for the Nine Key Elements. . . . . . . . . . . . . . . . . . . . . . . . . 34

Appendix B Selected Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Appendix C Countries in the Seven Geographical Regions. . . . . . . . . . . . . . . . . . . . . . . 40

Appendix D The Nine Key Elements for an Effective Public Sector Audit Activity. . . . . . 42

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

The IIA Research Foundation Sponsor Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

The IIA Research Foundation Board of Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

The IIA Research Foundation Committee of Research and Education Advisors . . . . . . 48


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ACKNOWLEDGMENTS

We owe specia l hanks o he Commiee of Research and Educaion Advisors (CREA) members who

len heir suppor, guidance, and insighs: Barry Ackers, IIASouh Africa, CREA; Jean Coroller, IIAFrance, IIA Research Foundaion Board of rusees, and co-chair for he 2015 Global Inernal AudiCommon Body of Knowledge projecs (CBOK); Seve Goodson, IIANorh America, CREA, formerPublic Secor Commiee member; and Sue Ulrey, IIANorh America, CREA, and co-chair forCBOK 2010.

ABOUT THE AUTHORS

Elizabeth (Libby) MacRae, CGAP,was he lead researcher and principal auhor of he Insiueof Inernal Audiors Research Foundaions (IIARFs) publicaion Internal Audit Capability Model(IA-CM) for the Public Sector. She has exensive inernal audi praciioner experience developed hroughher more han 30 years in he Governmen of Canada where she held hree chief audi execuive (CAE)posiions. She was also a senior research associae wih he Canadian Comprehensive Audi Foundaion(CCAF)a Canadian research and educaion foundaion. She has been a member of he Insiueof Inernal Audiors (IIA) for more han 20 years, during which ime she was presiden of he OawaChaper, a member of he Vision for he Fuure ask Force, he Professional Issues Commiee, heInernal Audi Sandards Board, he Public Secor Commiee, and he Common Body of Knowledge

(CBOK) 2015 Praciioner Subcommiee. She is also he chairperson of a Unied Naions AudiCommiee, which provides her wih experience in inernaional and public secor governance, riskmanagemen, and accounabiliy.

Diane van Gils, PhD,worked for 10 years as a praciioner in he developmen of inernal conrolframeworks and qualiy managemen sysems wihin public adminisraions a inernaional andnaional levels. She hen compleed a PhD on he deerminans on he inernal audi aciviies adopionand performance in he public secor based on heInternal Audit Capability Model (IA-CM) for the PublicSector(IIA RF, 2009). She received wo prizes for her conribuion o inernal audi and public accouningresearchhe European Confederaion of Insiues of Inernal Audiing (ECIIA) and he ComparaiveInernaional Governmenal Accouning Research (CIGAR) Nework awards. She is now saring aninernal audi career in he Governmen of Belgium while conribuing o various scienific publicaionsand execuive courses on inernal audi, inernal conrol, and risk managemen in he public secor.



EXECUTIVE SUMMARY

Inernal audiors in he public secor operae in an environmen wih unique challenges. his sudy

used a global survey sponsored by he Insiue of Inernal Audiors (IIA) o analyze he condiion ofhe public secor worldwide regarding he elemens ha are necessary o esablish an effecive inernalaudi aciviy.

he primary research quesions were:

Wha are he greaes srenghs of inernal audi aciviies in he public secoraround he world?

Wha are he mos significan barriers o audi ef feciveness faced by inernal audiaciviies in he public secor around he world?

Wha are he main regional differences?

he repor is based on he IIAs Supplemental Guidance: he Role of Auditing in Public SectorGovernance, 2nd ediion (2012). his documen defined he following nine elemens as essenial foran effecive public secor audi aciviy: 1) organizaional independence, 2) a formal mandae, 3) unre-sriced access, 4) sufficien funding, 5) compeen leadership, 6) objecive saff, 7) compeen saff, 8)sakeholder suppor, and 9) professional audi sandards.

hese nine elemens were compared o findings from he II As 2010 Global Inernal Audi Survey,which included responses from 2,824 public secor praciioners from 107 counr ies (ou of a oal of13,500 individual respondens). he IIA Research Foundaion (IIARF) conducs his global surveyevery f ive years as one of he projecs for he II As Global Inernal Audi Common Body of Knowledge

(CBOK).Highlighs from he findings include:

More han wo-hirds of public secor respondens indicaed ha inernal audiingwas required by law or regula ion in he jurisdicions in which heir organizaionswere based. Inernal audiing was required by law or regulaion he mos in heEurope-Cenral Asia region, and he leas in he Unied Saes and Canada,followed closely by he Middle Eas and he Asia Pacific regions.

Abou a f ifh of public secor respondens indicaed ha hey had been subjeco coercion o change a raing or assessmen or wihdraw a finding in an inernal

audi repor. Inernal audior respondens from Africa indicaed ha hey hadexperienced coercion he mos, while respondens from he Unied Saes andCanada indicaed ha hey had experienced i he leas.

Abou half he public secor chief audi execuive (CAE) respondens indicaedha an audi commiee or equivalen was esablished in heir organizaions,

bu only a quarer of hem indicaed ha he audi commiee was involved inheir appoinmens.


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Abou 40% of he CAE respondens indicaed ha hey had more han six yearssenior experience as a CAE or equivalen. CAE respondens from Lain Americaand he Car ibbean had he mos senior experience (60%). By conras, CA Erespondens from Europe-Cenral Asia had he leas senior ex perience (25%).

Public secor inernal audiors and heir sakeholders can use he resuls of his sudy o comparehe condiions in heir organizaions o oher public secor organizaions in heir region and around he

world. his informaion can hen be used o arge he mos beneficial areas for improvemen.

SECTION 1 METHODOLOGY

Public secor audi aciviies mus be configured appropriaely o enable public secor organizaions o

fulfill heir duy o be accounable and ransparen o he public, while achieving heir objecives effec-ively, efficienly, economically, and ehically.Because of he exraordinary demand for guidance relaed o audiing in he public secor, in 2012

he IIA updaed is supplemenal guidance iled he Role of Auditing in Public Sector Governance,2ndediion. he updaed pracice guide presened nine key elemens needed o esablish an effecive publicsecor audi aciviy (see exhibi 1.1). All nine key elemens mus exis for he audi aciviy o be effec-ive. For an explanaion of hese nine key elemens, see appendix D.

Exhibit 1.1: The Nine Key Elements of an Effective Public Sector Audit Activity

1. Organizational independence

2. A formal mandate

3. Unrestricted access

4. Sufficient funding

5. Competent leadership

6. Objective staff

7. Competent staff

8. Stakeholder support

9. Professional audit standards

Source:Supplemental Guidance: The Role of Auditing in Public Sector Governance, 2ndedition (Altamonte Springs, FL: The

Institute of Internal Auditors, January 2012), 68.

MAPPING THE GLOBAL SURVEY RESPONSES INTO THE NINE KEY ELEMENTS

he firs sep of he sudy was o idenify which quesions from he IIAs 2010 Global InernalAudi Survey would serve as measures for he nine key elemens. he answers o hese quesions wereconvered ino percenages ha ref leced he proporion of respondens who indicaed agreemen wih asaemen or exisence of a condiion described in he survey quesion.1



For six of he nine elemens, he survey provided a variey of relevan findings, bu here was some-wha l imied informaion for hree of he elemens (speci fically, unresriced access, sufficien funding,and sakeholder suppor). Furher research could be done o obain more comprehensive informaion.

HOW TO USE THIS REPORT

Inernal audiors and heir sakeholders can use he resuls of his sudy o idenif y areas of srenghand areas ha need improvemen o increase he effeciveness of heir inernal audi aciviies. o akeful l advanage of he findings from his sudy, he reader is encouraged o also obain wo oher key publi-caions for public secor inernal audiors:

IIA Supplemenal Guidance: he Role of Auditing in Public Sector Governance, 2nd ediion(January 2012)

IIARF repor:Internal Audit Capability Model (IA-CM) for the Public Sector (2009)

In addiion, a companion sudy iled he Capabilities of Internal Auditors in the Public Sector is

also available from he IIARF. his sudy analyzed he 2010 Global Inernal Audi Survey based onhe framework of he Internal Audit Capability Model (IA-CM) for the Public Sector.2 aken ogeher,he curren repor and he companion repor provide a horough picure of he characerisics of publicsecor inernal audiors around he world.

For a seleced lis of addiional resources on hese opics, see appendix B.

SECTION 2 CHARACTERISTICS OF PUBLIC SECTOR RESPONDENTS

he II As 2010 Global Inernal Audi Survey (GIAS) received abou 13,500 responses from inernalaudiors and oher praciioners around he world. Ou of his group, 2,824 individual respondens

worked for public secor/governmen organizaions (see exhibi 2.1). his repor focuses on describingresponses from he public secor respondens only.

(Noe ha he II A defines he public secor as governmens and all publical ly conrolled or publi-cally funded agencies, enerprises, and oher eniies ha deliver public programs, goods, or services.3)


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Exhibit 2.1. Organization Types of All Survey Respondents

Privately held (non-listed) organization 3,458 29%

Publically traded (listed) organization 4,630 38%

Public sector/government 2,824 23%

Not-for-profit organization/nongovernment organization 699 6%

Other 431 4%

Total valid responses (for this question) 12,042 100%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 11, all respon-

dents. Note:The total number of The IIAs 2010 Global Internal Audit Survey responses was 13,582, of which 12,042 valid

responses were obtained for this question.

he chaper provides regional analysis for he demographic characerisics of he public secor

survey respondens. hese characerisics include:

Individual Characteristics

Posiion levels held

Geographic regions where public secor respondens worked

Organizational Characteristics

Geographic scope of heir organizaions

Number of employees in he organizaion

Revenue or budge for he organizaion

Age of he inernal audi aciviy

Other Contextual Characteristics of the Organization

Legal requiremens for organizaions o have an inernal audi aciviy

Exisence of a long-erm sraegic plan

Implemenaion of an inernal conrol framework Exisence of an ehics policy

Exisence of a corporae governance code

INDIVIDUAL CHARACTERISTICS

Level of Position in the Organization

Public secor respondens came from a variey of levels (see exhibi2.2).



Exhibit 2.2. Level of Positions Held by Public Sector Respondents

0% 5% 10% 15% 20% 25% 30% 35%

Service provider provider/non-partner/other

Internal audit management/service provider

management/outsource contract manager

Chief audit executive (CAE)

Internal audit senior or supervisor/service provider senior or supervisor

Internal audit staff/service provider staff

1%

16%

23%

27%

33%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 5b.

For he purposes of his repor, i is imporan o noe ha some survey quesions were only giveno CAEs. here were 645 CA E respondens ou of a oal of 2,824 public secor respondens. As needed,his sudy will indicae which quesions were answered by public secor CAEs only.

Geographic Regions of Public Sector Respondents

All respondens were asked o indicae in which locaion hey primarily praciced inernal audiing.heir responses were grouped in seven differen broad geographical areas. For a lis of which counries

were placed ino each region, see appendi x C. he regions for a ll public secor respondens are shownin exhibi 2.3. Please noe ha because of he relaively small number of respondens from he MiddleEas, some of he saisical analysis for he Middle Eas region wil l show more variance compared o heoher regions.


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Exhibit 2.3. All Public Sector Respondents per Region

0% 5% 10% 15% 20% 25% 30%

Middle East

Africa

Asia Pacific

Europe-Central Asia

Latin America and Caribbean

Western Europe

United States and Canada

4%

11%

9%

12%

16%

23%

25%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 1c.

ORGANIZATIONAL CHARACTERISTICS

Geographic Scope of Respondents Organizations

Exhibit 2.4. Geographic Scope of Public Sector Respondents Organizations

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

International/multinational

Local

State/provincial/regional

National 42%

18%

8%

32%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 14.



Number of Employees in the Organization

Exhibit 2.5. Number of Employees in Public Sector Respondents Organizations

0% 5% 10% 15% 20% 25% 30% 35%

1-50

51-100

101-500

501-1,000

1,001-5,000

5,001 or more 31%

18%

2%

4%

32%

13%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 13a.

Revenue or Budget for the Organization

Exhibit 2.6. Organizational Revenue or Budget in U.S. Dollars for Public Sector Respondents

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

$26 billion or more

$15 billion to $25 billion



$500 million to $1 billion

$500M or less

17%

41%

4%

11%

19%

8%



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Age of the Internal Audit Activity

Exhibit 2.7. Age of the Public Sector Internal Audit Activity

0% 5% 10% 15% 20% 25% 30% 35%

0-6 years

7-10 years

11-25 years

26-and more 28%

22%

32%

18%


OTHER CONTEXTUAL CHARACTERISTICS OF THE ORGANIZATION

he environmenal characerisics are imporan o include in his overview because hey inf luencewhich performance level would be mos appropriae for he inernal audi aciviy. hey also inf luencehe developmen of inernal audi pracices.

No every organizaion requires he same level of inernal audi capabiliy or sophisicaion. he

appropriae level will be commensurae wih he naure and complexiy of he organizaion and he riskso which he organizaion may be exposed. Oher conexual characerisics of he organizaion includehe exernal regulaory environmen and he inernal managemen and adminisraion.

Internal Audit Activity Required by Law

he exernal regulaory environmen may impac he capabiliy of he inernal audi aciviy.Specifically, having a legal mandae may give more legiimacy o he inernal audi aciviy.

A global average of hree quarers of he public secor respondens (77%) indicaed ha inernalaudiing was required by law or regulaion where heir organizaions were based. he highes percenageof respondens wih legal mandaes was from Europe-Cenral Asia (92%), and he lowes rae was in heUnied Saes and Canada (66%) (see exhibi 2.8).



Exhibit 2.8. Internal Auditing Required by Law in Public Sector Organizations

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Average of Public Sector Respondents


Asia Pacific

Middle East

Western Europe

Africa


Europe-Central Asia 92%

66%

77%

70%

86%

89%

77%

70%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 48: Does this

statement apply to your organization?

Strategic Plans and Controls

he inernal managemen and adminisraive environmen of he organizaion influences helevel of performance of he inernal audi aciv iy. For example, a more maure organizaion wih sronggovernance, accounabiliy, and conrol frameworks will more likely be able o suppor an inernal audiaciviy a a higher capabiliy level.

Mos public secor respondens indicaed ha heir organizaions have implemened managemenconrol ools such as inernal conrol frameworks (79%) and a long-erm corporae sraegic plan (67%)(see exhibi 2.9).

Exhibit 2.9. Strategic Plans and Controls in Public Sector Organizations

AfricaAsia

Pacific

Europe-

Central

Asia

Latin

America

and

Caribbean

Middle

East

United

States

and

Canada

Western

Europe

Public

Sector

Average

Long-term

strategic

plan for the

organization1

70% 71% 59% 69% 65% 63% 73% 67%

Implemented

an internal

control

framework2

79% 81% 78% 90% 75% 72% 77% 79%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation.1Question 16: Which of the following exists in your organization:2Question 48: Does this statement apply to your organization?


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Ethics Policy and Corporate Governance Code

I is ineresing o noe ha respondens were almos wice as likely o have an ehical code (69%)as hey were o have a corporae governance code (38%) (see exhibi 2.10).

Exhibit 2.10. Ethics Policy and Corporate Governance in Public Sector Organizations

AfricaAsia

Pacific

Europe-

Central

Asia

Latin

America

and

Caribbean

Middle

East

United

States

and

Canada

Western

Europe

Public

Sector

Average

Corporate

ethics policy/

code of

ethics/code

of conduct

60% 79% 61% 68% 68% 76% 67% 69%

Corporate

governance

code

32% 50% 16% 33% 40% 38% 48% 38%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 16: Which of the

following exists in your organization:

SUMMARY

he key demographic findings from he public secor respondens were:

2,824 public secor respondens from around he world

48% worked in he Unied Saes and Canada and Wesern Europe

63% worked for organizaions wih more han 1,000 employees

60% worked for inernal audi aciv iies in ex isence 11 years or more

77% indicaed ha inernal audiing was required by law or regulaion where heorganizaion was based



SECTION 3 FINDINGS

his secion presens he 2010 GIAS public secor responses in relaion o each of he nine key elemens.

hese findings will help inernal audiors in he public secor o compare he condiions in heir orga-nizaions o oher public secor organizaions. he resuls can also be used o communicae wihsakeholders abou he condiions ha are presen in an organizaion.

OVERVIEW

he discussion of each key elemen sars wih a able ha names he elemen and gives one or morecharacerisics of he elemen (based on he IIAs supplemenal guidance).

Each characerisic is followed by a lis of he iem(s) from he survey ha apply o ha characer-isic, along wih a score. he score indicaes eiher:

he percenage of public secor respondens who indicaed heir organizaionsexperienced he condiion or aciviy ha was descr ibed, or

he percenage of public secor respondens who agreed wih a saemen fromhe survey

hese scores are he global averages for public secor respondens. Regional differences aredescribed in he ex, and all of he regional scores are repored in appendix A. he reader is encour-aged o use appendix A as a resource for undersanding he unique characerisics of his or her region.(Appendix A also documens which 2010 GIAS quesions were used in his sudy.)


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commiees or equivalen and idenifying he roles and responsibiliies of hose commiees, such asappoining and communicaing wih he CAE.

Exhibit 3.1. Internal Auditors Subject to Coercion in the Public Sector

Not applicablewe do not give ratings or assessmentNoYes

13% 66%

21%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 40c: Have

you been subject to coercion (extreme pressure) to change a rating or assessment or to withdraw a finding in an internal audit

report?

Exhibit 3.2. Regional Responses for Internal Auditors Subject to Coercion in the Public Sector

0% 5% 10% 15% 20% 25% 30% 35%



Middle East

Western Europe

Asia Pacific

Europe-Central Asia

Africa 31%

19%

13%

23%

26%

26%

24%



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Exhibit 3.3. Main Actors Involved in Appointing the CAE

CEO/president/head of government agency 63%

Audit committee/committee chairman 25%

Board/supervisory committee 21%

Chairman of the board/supervisory committee 13%

Chief financial officer (CFO)/vice president of finance 10%

Chief operating officer (COO) 5%

Other 18%

Source: The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 17a: Who is

involved in appointing the chief audit executive (CAE) or equivalent? (please mark all that apply)

Note:Multiple responses were allowed for this question, so the total percentage will exceed 100%.

Exhibit 3.4. Establishment of an Audit Committee or Equivalent

United States and Canada 81%

Asia Pacific 71%

Africa 69%

Latin America and Caribbean 53%

Middle East 50%

Western Europ 41%


Total Public Sector CAEs 53%

Source: The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 19: Is there an

audit committee or equivalent in your organization?

ELEMENT #2: A FORMAL MANDATE

A Formal Mandate

Characteristics:The audit activitys powers and duties should be established by the public sectors consti-tution, charter, or other basic legal document. Among other topics, this document would address procedures

and requirements of reporting and the obligation of the audited entity to collaborate with the auditor.

Internal auditing is required by law or regulation where the organization is

based.77%

Internal audit charter is established 88%

Internal audit mission statement is established 59%

Internal audit team is involved in the formal reporting of results 94%



A formal mandae of an inernal audi aciviy (such as ha included in an organizaional policy)can be furher srenghened wihin he organizaion when he inernal audi aciviy is also required bya legal mandae. Abou hree-quarers of he respondens (77%) indicaed ha heir inernal audi aciv-iies were required by law or regulaion where heir organizaions were based.

Wih respec o oher mandae documens, almos nine ou of 10 of he CAE respondens (88%)

indicaed ha heir inernal audi aciviies had esablished an inernal audi charer. Abou six ou of 10of he CAE respondens (59%) indicaed ha hey had esablished an inernal audi mission saemen.

In erms of formal reporing (he requiremens and procedures of which are ofen included in hemandae documen), nearly all of he CAE respondens (94%) indicaed ha heir inernal audi eams

were involved in he formal reporing of resuls o senior managemen afer he release of an audi repor.While organizaions do no have much conrol over wheher laws or regulaions in heir areas

mandae inernal audi aciviies, hey can sugges esablishmen of inernal audi charers andmission saemens.

ELEMENT #3: UNRESTRICTED ACCESS

Unrestricted Access

Characteristics:Audits should be conducted with complete and unrestricted access to employees, prop-

erty, and records as appropriate for the performance of audit activities.

Respondents (CAEs only) agreed with this statement: Internal audit has suffi-

cient status in the organization to be effective.76%

Opportunities for Improvement for Element #3: Unrestricted Access

CAE respondens should reques complee and unresriced access o employees, propery, and

records in he performance of inernal audi aciviies.

ELEMENT #4: SUFFICIENT FUNDING

Sufficient Funding

Characteristics:The audit activity must have sufficient funding relative to the size of its audit responsibili-

ties. This important element should not be left under the control of the organization being audited, because

the budget impacts the audit activitys capacity to perform its responsibilities.

Measurements from the Survey

None Not applicable

No daa from he IIAs 2010 Global Inernal Audi Survey daa are repored on his elemen, ashe survey did no address quesions abou funding issues. Insufficien funding would creae a signifi-can barrier o fulfilling he roles and responsibiliies of he inernal audi aciviy in he public secor.herefore, CAEs should reques sufficien funding relaive o he size of heir audi responsibiliies, anddecisions relaing o such funding should be independen of he organizaion being audied.


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ELEMENT #5: COMPETENT LEADERSHIP

Competent Leadership

Characteristics:The leader should be knowledgeable of applicable audit standards, professionally qual-

ifiedpreferably certifiedand competent to oversee and manage an audit activity. Moreover, the CAE

should be an articulate public spokesperson for the audit activity.

Measurements from the Survey

CAE has senior experience as a CAE or equivalenta 40%

CAE professional certification(s) in internal auditing 71%

aSenior experience was defined as having more than six years of experience as a CAE.

More han wo-hirds of CA E respondens (71%) indicaed ha hey had professional cerificaionsin he inernal audi field or equivalen. he Ceri fied Inernal Audior (CIA) was he professional ceri-

ficaion held by mos of he CAE respondens, followed by he public accounancy cerificaions. heCerif ied Governmen Audi Professional (CGAP) was he hird mos-cied cerificaion.

In erms of senior experience, CAE respondens were asked o specify he number of years hey hadbeen work ing as a CAE in heir curren and previous organizaions. Sur vey resuls indicaed ha fewerhan half he CA E respondens (40%) had more han six years experience as a CAE in heir curren andprevious organizaions (see exhibi3.5). Analysis by region showed ha 60% of he CAE respondensfrom Lain America and Caribbean had senior experience compared o 25% of he CAE respondens ofEurope-Cenral A sia (see appendix A). I would seem pruden for public secor organizaions o ensureha heir CAEs have sufficien experience o increase he leadership capaciy and credibiliy of heirinernal audi aciviies.

Exhibit 3.5. Total Years of Experience as a CAE or Equivalent for Public Sector Respondents

0% 5% 10% 15% 20% 25% 30% 35%

3 years or fewer

3-6 years

7-9 years

10 years or more

29%

31%

26%

14%




Other Measures for Competent Leadership

Most Important General Competencies for CAEs

he survey provided oher helpful quesions ha could also be used o evaluae compeen lead-ership. In paricular, CAE respondens were given a lis of general compeencies and were asked oidenify he five mos imporan general compeencies needed for heads of inernal audi o perform heir

work. Exhibi 3.6 shows wha percenage of respondens chose each compeency as one of he five mosimporan compeencies for CAEs o have.

Exhibit 3.6. General Competencies Chosen as One of the

Five Most Important Competencies for CAEs

Ability to promote the value of the internal audit activity within the organization 88%

Communication skills (including oral, written, report writing, and presentation skills) 71%

Keeping up-to-date with industry and regulatory changes and professional standards 60%

Conflict resolution/negotiation skills 51%

Problem identification and solution skills (including critical, conceptual, and analytical think-

ing skills)48%

Organizational skills (including project and time management) 45%

Staff training and development 38%

Change management skills 30%

Competency with accounting frameworks, tools, and techniques 13%

Competency with IT/ICT frameworks, tools, and techniques 11%

Cultural fluency and foreign language skills 5%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 46: Please

mark the five most important of the following competencies for the [head of the internal audit activity].

Note:Multiple responses were allowed for this question, so total percentage will exceed 100%.

he regional responses regarding he general compeencies were very similar, wih he followingnoeworhy excepions:

Keeping up-o-dae wih indusry and regulaory changes and professionalsandards (see exhibi 3.7)

Conflic resoluion/negoiaion skills (see exhibi 3.8)


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Exhibit 3.7. Regional Differences in Ratings for Keeping Up-to-

Date with Industry, Regulatory, and Standards Changes

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Public Sector Total

Asia Pacific


Europe-Central Asia

Middle East

Western Europe


Africa 77%

47%

60%

50%

47%

70%

63%

50%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 46: Please mark

the five most important of the following competencies for the [head of the internal audit activity]. This table shows the response

for the competency titled Keeping Up-to-Date with Industry, Regulatory, and Standards Changes.

Exhibit 3.8. Regional Differences in Ratings for Conflict Resolution/Negotiation Skills

0% 10% 20% 30% 40% 50% 60% 70%

Public Sector Total

Africa

Europe-Central Asia


Middle East

Western Europe

Asia Pacific


33%

51%

43%

43%

59%

53%

50%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 46: Please markthe five most important of the following competencies for the [head of the internal audit activity]. This table shows the response

for the competency titled Conflict Resolution/Negotiation Skills.


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Exhibit 3.10. Behavioral Skills Chosen as One of the Five

Most Important Skills for Internal Audit Staff

Confidentiality 74%

Objectivity 70%

Communication sending clear messages, listening 61%

Judgment 48%

Work independently 45%

Team player collaboration/cooperation 41%

Work well with all levels of management 30%

Governance and ethics sensitivity 25%

Influence ability to persuade 22%

Relationship building building bonds 12%

Facilitation 12%

Change catalyst 10%

Team building/creating group synergy 9%

Leadership 6%

Staff management 2%


I is imporan o noe ha here was significan regional variaion for hree of he five highes-rankedbehavioral sk ills. hese sk ills were confidenialiy, judgmen, and working independenly. hese resulsunderscore he imporance of recognizing ha regions have differing perspecives regarding he relaiveimporance of behavioral skills. A behavioral skill ha is considered mos imporan for one region mayno be considered as imporan in anoher region. Please review he exhibis on he nex wo pages formore informaion.

Confidenialiy (see exhibi 3.11)

Judgmen (see exhibi 3.12)

Working independenly (see exhibi 3.13)


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Exhibit 3.11. Regional Differences in Ratings for Confidentiality

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Public Sector Total


Europe-Central Asia

Middle East

Asia Pacific

Western Europe

Africa

Latin America and Caribbean 90%

64%

74%

70%

66%

88%

78%

71%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 44a: Please

indicate the importance of the following behavioral skills for you to perform your work at your position in the organization. This

table shows the percentage of public sector CAEs who indicated very important for the skill titled Confidentiality.

Exhibit 3.12. Regional Differences in Ratings for Judgment

0% 10% 20% 30% 40% 50% 60% 70%

Public Sector Total

Middle East

Africa

Europe-Central Asia

Asia Pacific


Western Europe


20%

48%

39%

38%

49%

43%

43%


indicate the importance of the following behavioral skills for you to perform your work at your position in the organization. Thistable shows the percentage of public sector CAEs who indicated very important for the skill titled Judgment.



Exhibit 3.13. Regional Differences in Ratings for Working Independently

0% 10% 20% 30% 40% 50% 60%

Public Sector Total

Middle East


Africa

Asia Pacific

Western Europe



30%

45%

34%

31%

49%

47%

46%


indicate the importance of the following behavioral skills for you to perform your work at your position in the organization. This

table shows the percentage of public sector CAEs who indicated very important for the skill titled Working Independently.

ELEMENT #8: STAKEHOLDER SUPPORT

Stakeholder Support

Characteristics:The legitimacy of the audit activity and its mission should be understood and supported by

a broad range of elected and appointed public sector officials, as well as by the media and involved citizens.

Respondents agreed with this statement: The internal audit activity is credible within

the organization.89%

In erms of credibiliy of he inernal audi aciviy, mos of he CAE respondens (89%) agreedor srongly agreed ha heir inernal audi aciviies were credible wihin heir organizaions. Furheranalysis by region shows similar resuls, excep Europe-Cenral Asia wih 79%. I would be ineresing ocomplemen hese views wih a sakeholders perspecive.


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ELEMENT #9: PROFESSIONAL AUDIT STANDARDS

Professional Audit Standards

Characteristics: Professional audit standards, such as the International Professional Practices Framework

(IPPF) promulgated by The IIA, support the implementation of the previous elements and provide a frame-

work to promote quality audit work that is systematic, objective, and based on evidence. Audit activitiesshould conduct their work in accordance with recognized standards.

Conformance with the Standards is seen as a key factor for the internal audit activity

to add value to the governance process.79%

Internal audit activity conforms to some or all of the Standards. 88%

Verification of compliance with other standards or codes. 43%

In response o quesions on he Standards, an average of 79% of respondens (CAEs only) agreedor srongly agreed ha conformance wih he Standardswas a key facor for heir inernal audi aciv-iies o add value o he governance process. here were regional variaions, wih Lain America andhe Caribbean wih highes percenage of respondens who viewed he Standardsas a key facor (91%),and Wesern Europe wih he lowes percenage (73%, see appendix A). In erms of Standardscompli-ance, mos CAE respondens (88%) indicaed ha heir inernal audi aciviies conformed wih heStandardsa leas parial ly.

As for compliance wih oher sandards or codes, fewer han half he CAE respondens (43%)indicaed ha par of heir inernal qualiy assessmen and improvemen programs included verifica-ion of compliance wih oher sandards or codes. Furher analysis by region reveals some differences.Seveny percen of CAE respondens from he Middle Eas and 60% from Lain America and Caribbeanregions indicaed ha heir programs included verificaion of compliance wih oher sandards or codes(see exhibi 3.14). By conras, 35% of he CAE respondens from Wesern Europe indicaed ha heirprograms included such verificaions.



Exhibit 3.14. Verification of Compliance with Other Standards or Codes

(as part of a Quality Assessment and Improvement Program)

0% 10% 20% 30% 40% 50% 60% 70% 80%

Public Sector Total

Western Europe

Europe-Central Asia


Africa

Asia Pacific


Middle East 70%

35%

43%

41%

40%

60%

49%

44%

Source:The Global Internal Audit Survey, 2010, The Institute of Internal Auditors Research Foundation, question 38: For your

internal audit activity, which of the following is part of your internal audit quality assessment and improvement program?

[Verification of Compliance with Other Standards or Codes]

SECTION 4 SUMMARY AND CONCLUSIONS

his chaper summarizes he main conclusions reached for each key elemen and idenifies opporuni-ies for improving public secor inernal audi aciviies.

Key Element #1: Organizational Independence

Inernal audior respondens expressed a high degree of confidence in he independence of heirinernal audi aciviies. More han 90% of public secor CAEs agreed or srongly agreed ha indepen-dence was a key facor for he inernal audi aciviy o add value, and ha heir inernal audi aciviies

were independen, objecive assurance and consuling aciviies wihin heir organizaions, regardlessof he region. Also, abou 77% of CAE respondens had op-level managemen involved in appoininghem, and 81% had a direc adminisraive reporing relaionship o he CEO or governing body.

However, a large number of respondens had no esablished some key componens o facil iae heindependence of he inernal audi aciviy, such as esablishmen of an audi commiee or is equiva-len. here were large regional differences in his regard, wih he U.S. and Canada having he highespercenage of audi commiees (81%) and Europe-Cenral Asia having he lowes (10%). he globalaverage was 53%. Finally, abou one ou of five respondens from all regions indicaed ha hey had beensubjec o coercion o change a raing or assessmen, or o wihdraw a finding in an inernal audi repor.


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33/49


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APPENDIX A REGIONAL SCORES FOR THE NINE KEY ELEMENTS

Note:his able is based on informaion from he IIAs 2010 Global Inernal Audi Survey. he sais-

ics in his able represen he percenage of public secor respondens who affirmed ha he aciviy orcondiion described in he survey quesion was represened in heir organizaion. hese measures coverhe nine key elemens for an effecive public secor audi aciviy as described in he IIAs supplemenalguidance,he Role of Auditing in Public Sector Governance,2nd ediion.

he column labelled n valid shows how many respondens answered he paricular quesion.Quesions wih responses of 645 or less were answered only by public secor CAEs. Quesions wih morerespondens were answered by all saff levels of public secor inernal audiors.

2010Survey

QuestionN

umber

Africa

AsiaPacifi

c

Europe-Ce

ntralAsia

LatinAmerica

andCaribb

ean

MiddleEast

UnitedSta

tes

andCanad

a

WesternEurope

Total Public Sector

n valid Score

Key Element 1: Organizational

Independence

Independence is a key factor for

the internal audit activity to add

value25b 90% 89% 87% 98% 100% 93% 94% 635 92%

Internal auditors subject to

coercion 40c 31% 26% 26% 19% 23% 13% 24% 2802 21%

Top-level management involved

in the appointment of the CAE 17a 77% 75% 76% 71% 80% 80% 79% 645 77%

Audit committee involved in the

appointment of the CAE 17a 41% 47% 6% 15% 30% 40% 15% 645 25%

Direct administrative reporting

relationship to CEO or govern-

ing body9 92% 82% 81% 82% 80% 79% 79% 645 81%

Audit committee or equivalent

established 19 69% 71% 10% 53% 50% 81% 41% 645 53%

Appropriate access to the audit

committeea 21a 91% 94% 70% 92% 80% 90% 94% 336 91%

Internal audit activity is indepen-

dent, objective assurance, and

consulting25b 81% 88% 86% 94% 80% 93% 96% 645 91%



2010Survey

Q

uestionNumber

Africa

AsiaPacific

Europe-CentralAsia

LatinAmerica

andCaribbean

M

iddleEast

U

nitedStates

andCanada

W

esternEurope

Total Public Sector

n valid Score

Key Element 2: A Formal

Mandate

Internal auditing is required by

law or regulation where the

organization is based48 86% 70% 92% 89% 70% 66% 77% 2682 77%

Internal audit charter established 16 88% 93% 95% 72% 70% 95% 85% 645 88%

Internal audit mission statement

established 16 64% 59% 49% 69% 70% 84% 38% 645 59%

Internal audit team involved inthe formal reporting of results

41 94% 91% 96% 91% 80% 96% 93% 645 94%

Key Element 3: Unrestricted

Access

Sufficient status in the organiza-

tion to be effective 25b 72% 79% 70% 85% 100% 76% 77% 645 76%

Key Element 5: Competent

Leadership

CAE professional certification(s)

in internal audit

6 73% 76% 70% 47% 80% 91% 59% 645 71%

CAE has senior experience as a

CAE or equivalentb 8 41% 40% 25% 60% 33% 45% 39% 640 40%

Ability to promote the value of

the internal audit activity within

the organizationc46 89% 88% 83% 82% 70% 93% 89% 645 88%

Communication skillsc 46 67% 68% 71% 66% 40% 80% 69% 645 71%

Keeping up-to-date with indus-

try and regulatory changes and

professional standardsc46 77% 47% 50% 47% 50% 70% 63% 645 60%

Conflict resolution/negotiation

skillsc 46 33% 59% 43% 43% 50% 61% 53% 645 51%

Problem identification and solu-

tion skillsc 46 50% 47% 53% 56% 20% 40% 48% 645 48%

Key Element 6: Objective Staff

Objectivity is a key factor for

your internal audit activity to add

value25b 95% 94% 95% 100% 90% 94% 98% 630 96%


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20

10Survey

Qu

estionNumber

Af

rica

As

iaPacific

Eu

rope-CentralAsia

La

tinAmerica

an

dCaribbean

MiddleEast

Un

itedStates

an

dCanada

WesternEurope

Total Public Sector

n valid Score

Conformance with The IIAs

Code of Ethics 25b 70% 79% 77% 74% 100% 89% 71% 645 77%

Objective and/or governance

and ethics sensitivityd 44 83% 79% 82% 84% 80% 72% 77% 645 78%

Key Element 7: Competent

Staff

Internal audit staff professional

certification(s) in internal audit 6 43% 59% 41% 31% 66% 67% 65% 2163 54%

Internal audit staff are members

of The IIA 1a 88% 86% 82% 71% 87% 99% 97% 2163 89%

Internal audit staff members

have at least 40 hours of formal

training per year10 72% 83% 68% 70% 67% 86% 78% 2141 77%

Confidentiality 44a 88% 71% 66% 90% 70% 64% 78% 645 74%

Objectivityd 44a 70% 68% 72% 69% 60% 67% 72% 645 70%

Communicationsending clear

messages, listeningd 44a 63% 54% 73% 57% 50% 67% 54% 645 61%

Judgmentd 44a 38% 43% 39% 43% 20% 63% 49% 645 48%

Work independentlyd 44a 34% 46% 54% 31% 30% 49% 47% 645 45%

Key Element 8: Stakeholder

Support

The internal audit activity is

credible within the organization 25b 83% 91% 79% 95% 100% 90% 93% 628 89%

Key Element 9: Professional

Audit Standards

Conformance with theStandardsis seen as a key

factor for the internal audit

activity to add value to the

governance process

25b 87% 76% 82% 91% 90% 77% 73% 633 79%



2010Survey

QuestionNumber

Africa

AsiaPacific

Europe-CentralAsia

La

tinAmerica

an

dCaribbean

M

iddleEast

UnitedStates

an

dCanada

W

esternEurope

Total Public Sector

n valid Score

Internal audit activity conforms

to some or all of theStandards 32 88% 90% 88% 85% 80% 93% 84% 645 88%

Verification of compliance with

other standards and codes 38 44% 49% 40% 60% 70% 41% 35% 645 43%

aThis response only includes public sector CAEs who indicated the presence of an audit committee in their organizations.bSenior experience was defined as having more than six years of experience as a CAE.cThe score for this item reflects the percentage of public sector CAE respondents who chose this skill as one of the five most

important general skills for a CAE.dThe score for this item reflects the percentage of public sector CAE respondents who indicated very important for this skill.


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APPENDIX B SELECTED BIBLIOGRAPHY

Periodicals/Articles

Carhill, K. M., and J. K. Kincaid. Applying he Sandards in Governmenal Inernal Audiing. Te InternalAuditor 52 (6) (1989): 6365.

Coupland, D. Te Inernal Audiors Role in Public Service Orienaion.Managerial Auditing Journal8(1) (1993): 313.

Goodwin, J. A comparison of Inernal Audi in he Privae and Public Secors.Managerial AuditingJournal19 (2004): 64050.

MacRae, E. A Framework for Audi Evoluion.Internal Auditor(February, 2010): 6869.

Van Gils, D., C. de Visscher, and G. Sarens. Le dveloppemen de laudi inerne dans le seceur publicbelge. lescope18 (3) (2012): 73107.

Books

Anderson, Uron, Kur F. Reding, Paul J. Sobel, Michael J. Head, Sridhar Ramamoori, and MarkSalamasick.Internal Auditing: Assurance & Consulting Services. Alamone Springs, FL: TeInsiue of Inernal Audiors Research Foundaion, 2007.

Cohen, A. G.Public Internal Financial Control (PIFC) A New Framework for Public Sector Management.Alamone Springs, FL: Te Insiue of Inernal Audiors Research Foundaion, 2007.

Swauger, Jodi, and Richard Chambers. Challenges in Government Auditing, Emerging Issues Series, Vol. 1,No. 3. Alamone Springs, FL: Te Insiue of Inernal Audiors Research Foundaion, 2004.

Te Insiue of Inernal Audiors.A Vision for the Future: Guiding the Internal Audit Profession to Excellence.Alamone Springs, FL: Te Insiue of Inernal Audiors, 2008.

Te Insiue of Inernal Audiors Research Foundaion. A Global Summary of the Common Body ofKnowledge 2006. Alamone Springs, FL: Te Insiue of Inernal Audiors Research Foundaion,2007.

Te Insiue of Inernal Audiors Research Foundaion. Inernaional Professional Pracices Framework,2011 ed.Alamone Springs, FL: Te Insiue of Inernal Audiors Research Foundaion, 2011.

Te Insiue of Inernal Audiors Research Foundaion. Quality Assurance Manual, 6h ed.(AlamoneSprings, FL: Te Insiue of Inernal Audiors Research Foundaion, 2009.

Te Insiue of Inernal Audiors Research Foundaion. Te IIAs Global Internal Audit Survey Report

I: Characteristics of an Internal Audit Activity.Alamone Springs, FL: Te Insiue of InernalAudiors Research Foundaion, 2010.

Te Insiue of Inernal Audiors Research Foundaion. Te IIAs Global Internal Audit Survey ReportII: Core Competencies for odays Internal Auditor.Alamone Springs, FL: Te Insiue of InernalAudiors Research Foundaion, 2010.

Te Insiue of Inernal Audiors Research Foundaion. Te IIAs Global Internal Audit Survey ReportIII: Measuring Internal Auditings Value.Alamone Springs, FL: Te Insiue of Inernal AudiorsResearch Foundaion, 2010.



Te Insiue of Inernal Audiors Research Foundaion. Te IIAs Global Internal Audit Survey ReportIV: Whats Next for Internal Auditing.Alamone Springs, FL: Te Insiue of Inernal AudiorsResearch Foundaion, 2010.

Te Insiue of Inernal Audiors Research Foundaion. Te IIAs Global Internal Audit Survey Report V:Imperatives for Change: Te IIAs Global Internal Audit Survey in Action.Alamone Springs, FL: Te

Insiue of Inernal Audiors Research Foundaion, 2010.

Other

Council of Europe Local and Regional Democracy. Inernal Audi a Local and Regional Level, repor,1999.

European Confederaion of Insiues of Inernal Audiing (ECIIA). Inernal Audiing in Europe, posiionpaper, 2005.

Fraser, John, and Hugh Lindsay.20 Questions Directors Should Ask About Internal Audit,orono, Canada:Te Canadian Insiue of Charered Accounans, 2004.

Organisaion for Economic Co-operaion and Developmen (OECD).Public sector modernization:Modernising accountability and control, policy brief. Paris, France: OECD, 2005.

Te Insiue of Inernal Audiors. Formulaing and Expressing Audi Opinions, Te IIA IPPF PraciceGuide, March 2009.

Te Insiue of Inernal Audiors. Te Role of Auditing in Public Sector Governance,November 2006.

Te Insiue of Inernal Audiors. Supplemental Guidance: Implementing a New Internal Audit Function inthe Public Sector,2012.

Te Insiue of Inernal Audiors Global. Supplemental Guidance: Optimizing Public Sector Audit Activities,2012.

Te Insiue of Inernal Audiors Global. Supplemental Guidance: Public Sector Definition and Te Role of

Auditing in Public Sector Governance,2012.Te Insiue of Inernal Audiors Global. Supplemental Guidance: Value proposition of Internal Auditing and

the Internal Audit Capability Model,2012.

Te Insiue of Inernal Audiors Research Foundaion.Applying Research for Effective Internal Auditing,repor, 2010.

Te Insiue of Inernal Audiors Research Foundaion.IIARF Resources Empowering Practitioners andImpacting Lives,repor, Summer 2011.

Te Insiue of Inernal Audiors Research Foundaion.Internal Audit Capability Model (IA-CM) for thePublic Sector, Te Insiue of Inernal Audiors Research Foundaion, Sepember 2009.

Van Gils, D., Te Developmen of Inernal Audiing wihin Belgian Public Eniies: a Neo-Insiuionaland New Public Managemen Perspecive, Ph.D. diss., Universiy of Louvain, 2012.htp://vial-es.sipr.ucl.ac.be/handle/boreal:110661.

Website

Te Insiue of Inernal Audiors. htp://www.heiia.org.


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APPENDIX C COUNTRIES IN THE SEVENGEOGRAPHICAL REGIONS

Note:hese seven regions were developed as par of he 2010 projecs for he Global Inernal AudiCommon Body of Knowledge (CBOK). he groupings were carefully defined o bring ogeher poliicalsaes wih similar economic hisories and curren economic condiions because hese facors wouldimpac he naure of inernal audi aciviies in hose saes.

1. The Africa region includes:

AlgeriaAngolaBeninBoswana

Burkina FasoBurundiCameroonCape VerdeCenral A frican RepublicChadComorosCongoCongo, Dem. Rep. ofDjiboui

Equaorial GuineaErireaEhiopiaGabonGambiaGhanaGuineaGuinea-BissauIvory CoasKenya

LesohoLiberiaMadagascarMalawiMaliMaurianiaMauriiusMoroccoMozambique

NamibiaNigerNigeriaRwandaSo om and Prncipe

SenegalSeychellesSierra LeoneSomaliaSouh A fricaSudanSwazilandanzaniaogounisia

UgandaZambiaZimbabwe

2. The Asia Pacific region includes:

AfghanisanAusraliaBangladeshBhuanBrunei

Burma (Myanmar)CambodiaChinaChinese aiwanEas imorFijiHong Kong, ChinaIndiaIndonesia

JapanKiribaiKorea, NorhKorea, SouhLaos

MalaysiaMaldivesMarshall IslandsMicronesiaMongoliaNauruNepalNew ZealandPakisanPalau

Papua New GuineaPhilippinesSamoaSingaporeSolomon IslandsSri Lankahailandongauvalu

VanuauVienam

3. The Europe and Central Asia

region includes:

AlbaniaArmeniaAzerbaijanBelarusBosnia and Herzegovina



BulgariaCroaiaCzech RepublicEsoniaGeorgia

HungaryKazakhsanKyrgyzsanLaviaLihuaniaMacedoniaMoldovaMonenegroPolandRomania

RussiaSerbiaSlovakiaSloveniaajikisanurkeyurkmenisanUkraineUzbekisan

4. The Latin America and the

Caribbean region includes:

Anigua and BarbudaArgeninaAr ubaBahamasBarbadosBelizeBermudaBoliviaBrazilChileColombia

Cosa RicaCuracaoCubaDominicaDominican Republic

EcuadorEl SalvadorGrenadaGuaemalaGuyanaHaiiHonduras

JamaicaMexicoNicaragua

PanamaParaguayPeruPuero RicoS. Kis and NevisS. LuciaS. Vincen and he GrenadinesSurinamerinidad and obagourks & CaicosUruguay

Venezuela

5. The Middle East region includes:

BahrainEgypIranIraqIsrael

JordanKuwaiLebanonLibya

OmanQaarSaudi ArabiaSyriaUnied Arab Emiraes

Yemen

6. The United States and Canada

region includes:

Unied SaesCanada

7. The Western Europe region

includes:

Andorra

AusriaBelgiumCyprusDenmarkFinlandFranceGermanyGreeceIcelandIreland

IalyLiechenseinLuxembourgMalaMonacoNeherlandsNorwayPorugalSan MarinoSpain

SwedenSwizerlandUnied Kingdom


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APPENDIX D THE NINE KEY ELEMENTS FOR ANEFFECTIVE PUBLIC SECTOR AUDIT ACTIVITY

Noe: he following maerial was excerped from he IIAs supplemenal guidance iled he Role ofAuditing in Public Sector Governance, 2ndediion.

An effecive public secor audi acivi y srenghens governance by maerially increasing ciizensabiliy o hold heir public secor eniy accounable. Audiors perform an especial ly imporan funcionin hose aspecs of governance ha are crucial in he public secor for promoing credibil iy, equiy, andappropriae behavior of public secor officials, while reducing he risk of public corrupion. herefore,i is crucial ha audi aciviies are configured appropriaely and have a broad mandae o achieve heseobjecives. he audi aciviy mus be empowered o ac wih inegriy and produce reliable services,alhough he specific means by which audiors achieve hese goals vary. A a minimum, public secoraudi aciviies need:

Organizational independence.Organizaional independence allows he audi aciviyo conduc work wihou inerference by he eniy under audi. he audi aciviy shouldhave suff icien independence from hose i is required o audi so ha i can boh conducand be perceived o conduc is work wihou inerference. Coupled wih objeciviy,organizaional independence conribues o he accuracy of he audiors work and heabiliy o rely on repored resuls. Independence is grealy impaced by how a CAE isappoined and can be erminaed. he Inernaional Professional Pracices Framework(IPPF) Pracice Advisory 1110-1 saes ha he CAE, reporing funcionally o he

board and adminisraively o he organizaions chief execuive officer, faciliaes orga-

nizaional independence. Imporan pars of his independence are he CAEs abiliyo be proeced from managemen or poliical inerference or realiaion resuling fromcarrying ou legiimae duies in accordance wih he Standards. he CAE also should befree o saff he audi aciviy wihou inerference from managemen or undue poliicalinfluence from public officials.

A formal mandate.he audi aciviys powers and duies should be esablished by hepublic secors consiuion, charer, or oher basic legal documen. Among oher opics,his documen would address procedures and requiremens of reporing and he obliga-ion of he audied eniy o collaborae wih he audior.

Unrestricted access. Audis should be conduced wih complee and unresricedaccess o employees, propery, and records as appropriae for he performance of heaudi aciviies.

Sufficient funding.he audi aciviy mus have sufficien funding relaive o he size ofis audi responsibiliies. his imporan elemen should no be lef under he conrol ofhe organizaion being audied, because he budge impacs he audi aciviys capaciyo perform is audi responsibiliies.



Competent leadership.he head of he audi aciviy mus be able o independenlyand effecively recrui, reain, and manage highly skilled saff wihou undue managerialor poliical inf luence. he leader should be knowledgeable of applicable audi sandards,professionally qualifiedpreferably cerifiedand compeen o oversee and managean audi aciviy. Moreover, he CAE should be an ariculae public spokesperson for he

audi aciviy.

Objective staff.An audi aciviys saff mus be objecive. Audi saff mus have impar-ial aiudes and avoid any confl ic of ineres. Conf lic of ineres is a siuaion in whichan inernal audior, who is in a posiion of rus, has a compeing professional or personalineres. A conflic of ineres may exis even if no unehical or inappropriae ac resuls.Such a conflic can creae an appearance of impropriey ha can undermine confidencein he inernal audior, he inernal audi aciviy, and he profession. Moreover, a conf licof ineres could impair an individuals abiliy o perform audi duies and responsibili-ies objecively.

Competent staff.he audi aciviy needs a professional saff ha collecively has henecessary qualificaions and compeence o conduc he full range of audis required byis mandae. Audiors mus comply wih minimum coninuing educaion requiremensesablished by heir relevan professional organizaions and sandards.

Stakeholder support. he legiimacy of he audi aciviy and is mission should beundersood and suppored by a broad range of eleced and appoined public secor offi-cials, as well as he media and involved ciizens.

Professional audit standards. Professional audi sandards, such as he InernaionalProfessional Pracices Framework (IPPF) promulgaed by he Insiue of Inernal

Audiors, suppor he implemenaion of he previous elemens and provide a frameworko promoe qualiy audi work ha is sysemaic, objecive, and based on evidence. Jus asmany public secor eniies have adoped inernal conrol sandardseiher as require-mens or guidance for public secor managersaudi aciviies should conduc heir

work in accordance wih recognized sandards.

NOTES

1. In erms of daa analysis, he non-responses were considered as valid answers for mos quesions.In oher words, he non-responses were inerpreed as absences of he relaed essenial pracice orkey elemen. Te inclusion of non-responses as valid answers has a minor effec on he saisicalresuls, because mos of he 2010 GIAS quesions seleced in he sudy framework have a very lownon-response rae.


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Te auhors of his repor also used he same daa analysis mehods in heir second forhcomingresearch repor from Te IIA Research Foundaion iledInternal Audit Capabilities andPerformance Levels in the Public Sector. In paricular, in cases where he same survey quesionswere referenced in boh sudies, boh repors used he same daa analysis approach and providedsimilar saisical resuls.

Te nine key elemens framework suppors some essenial inernal audi pracices idenified inhe IA-CM repor and goes furher on some opics such as inernal audi saff independence,objeciviy, and CAE leadership.

2. TeInternal Audit Capability Model (IA-CM) for the Public Sectoruses a building-block approacho improve he effeciveness of an inernal audi aciviy; ha is o say: essenial pracices a lowercapabiliy levels mus be implemened and susainable o esablish he foundaion for pracices ahe higher levels. Inernal audi professionals and sakeholders will need o use judgmen whenidenifying which essenial pracices need o be improved o ensure ha he necessary foundaionis esablished o implemen pracices a higher levels. In conras, all nine key elemens includedin he effecive public secor audi aciviy framework are of equal imporance and mus exis for

he audi aciviy o be effecive.

3. Te Insiue of Inernal Audiors, Supplemental Guidance: Public Sector Definition(AlamoneSprings, FL: Te Insiue of Inernal Audiors, December 2011), 3.



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Documents

Nine Elements Required for Internal Audit Effectiveness in the Public Sector