The fourth objective was: to determine whether internal audit activity is perceived as adding value in helping the University to accomplish its objectives.
The Institute of Internal Auditors define the concept of value added as detecting operational development, providing important opportunities to accomplish organisational objectives and to reduce risk exposure through both assurance and consulting services (Barac et al., 2010). With regard to the above-mentioned definition, it is essential to note that the idea of value added as described by the IIA involves four factors:
a. First, that the internal audit function offers significant opportunities to accomplish organisational goals. This indicates that the internal audit function should support the organisation in achieving its goals, including its strategic goals.
b. Second, the internal audit function should recognize operational development.
This is resonated in the definition of internal auditing, which highlights that the
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internal audit function’s activities must contribute to the development of the organisation’s processed (IIA, 2015a).
c. Third, the internal audit function must contribute to reducing risk exposure. In order to reduce the risks recognized, the internal audit function needs to define what difficulties may hinder the attainment of set goals, and also evaluate and determine whether controls that are in place are proper and acceptable in the light of the risks identified (Barac et al., 2010).
d. Fourth, the definition of value added highlights the element that the internal audit function adds value by executing both assurance and consulting facilities.
The prior definition of internal auditing concentrated on the independent appraisal, examination or evaluation service rendered by the internal audit function, however the new definition places emphasis on the value to be added, the evaluation and improvement of processes by the internal audit facilities.
While the previous definition supported assurance services; the new definition expands the role to include both assurance and consulting services(IIA, 2015a).
It is of absolute importance to describe what adding value is, so that an analysis of the contribution of Internal Audit to the management of entities can be made. The interpretation of value is not only limited to the financial aspects; as it includes human and physical aspects. Adding value in the internal audit theory is to connect all available resources, within and outside the company, which may be financial, material and human, with the purpose of reassuring improvements and fulfilling management objectives (Pinto et al., 2014). In the USA, internal audit function has shifted its direction to a value-adding function and the main focus of the literature on American internal audit is on how internal audit activities can create value in an organisation(Mihret et al., 2010).
The 21st century presents unique development prospects for the internal audit profession. Improvements in technology, the confluence of the Information and Internet Age, and the complete speed and growth of communication networks have expressively increased the spread of globalisation. Governance, risk, controls, and compliance processes within organisations have experienced important transformation to manage the increasing complication and complexity of global
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business operations. All of these expansions offer a massive prospect for internal audit functions, whether in-sourced, co-sourced, or outsourced, including prospects to add even greater value to their individual organisations (Bolger, 2011). Internal Audit has develop a value-adding service to organisations by supporting organisations in the management of risk through using refined risk modelling, computer-assisted audit techniques, statistical sampling and concentrating on the entire quality management as part of the audit procedure (Abuazza et al., 2015).
There are few general rules that have to be respected by internal auditors in order to assure their contribution to the progress of the company (Cristina et al., 2012),namely:
a. Internal auditors must be attentive to their obligation to prove to the management and the audit committee how internal audit works;
b. Internal auditors have to discover resolutions for cultivating internal audit strategy, particularly if they are necessary, in order to reassure the top level of effectiveness, starting from the real level of performance determine;
c. The internal audit strategy has to be motivated by the conception of value added for the work atmosphere; and
d. Internal auditors also have to be committed to their obligation to find the most applicable procedures and methods in assessing their performance.
The solutions to adding value beyond controls assurance, is through individuals, process, communication, and relationships. An internal audit function considering adding more value should (Tysiac, 2014):
a. Execute a resource examination by finding answers to questions like what abilities does the internal audit function hold, and how can those abilities be used to create more value? What expertise is missing? Should new employees be recruited to fill those gaps, or co-source? To be able to continue to deliver value, accurate resources needs to be obtained, and this starts with individuals;
b. Make a plan by constructing a mission because the accomplishment of a strategy is what internal auditors are trying to achieve. This must be communicated to relevant internal audit customers;
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c. Communicate once the value is added particularly because internal audit needs to make other divisions recognise the value that they add;
d. Build relationships with the business units which essentially benefits internal audit function more successfully because of the former’s enhanced understanding of their strategy and risks.