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The Internal Audit Value Chain (IAVC) Overview
The modern internal audit must embrace digital technology such as—Machine Learning (ML), Artificial Intelligence (AI), Data Analytics, and Visualization to add value and prove their worth in the organization. The current emphasis for internal audit is all about creating value. That is not enough!
Whose value is internal audit creating?
How is internal audit creating value?
What happens after internal audit creates value?
Answering these questions requires an End-To-End (E2E) agile internal audit framework and mindset to engage the enterprise stakeholders across value chains, business functions, and locations. The IAVC enables the CEO, C-Suite, the Board of Directors (BoD) and Committees, Program Managers, and Business Unit Leads to collaborate with the Chief Audit Executive (CAE) to create, capture, and sustain value. The IAVC provides a simple, flexible, and agile framework internal audit teams can use to accomplish the following:
01. Create Value
Starting point exploiting the impact of digital technology and new opportunities across your value chains to create value, providing an overarching objective for the organization.
02. Capture Value
What problems are you solving? How are these reflected in the strategy? How internal audit partners with management and position the organization to capture more value.
03. Sustain Value
What factors can impact your organization's ability to create and capture value in a sustainable manner? How internal audit partners with management to sustain performance.
Your organization's objectives are centered around optimal use of people, technology, processes, and corporate culture to achieve strategic goals, sustain performance, and drive profitability. The IAVC enables agile internal audit by providing simplicity, flexibility, and agility utilizing digital technology and connects the enterprise goals with the internal audit support objectives.
Only then can the CAE audit what matters and when it matters to leadership and stakeholders and provide actionable insights, to help management transform threats into sustainable growth opportunities. Internal audit's role in the value chain requires an understanding of the organization's:
Strategic direction and alignment – misalignments complicate the process of achieving objectives.
Risk management and monitoring – a roadmap to navigate the volatile and complex risk environment.
Operational efficiencies – partner with management to innovate, provide technology-enabled solutions, create value, and capture and sustain value by pursuing efficiencies.
Compliance and quality – is compliance and quality baked into the culture of your organization?
Financial management and governance – investments designing or re-designing for digital, monitor progress, and make timely execution changes to meet and exceed performance targets.
Responsiveness – create, capture, and sustain value while adapting to the rapidly changing business, political and regulatory environments.
Digital Connectivity - Internal Audit Value (IAVC)
Identifying, prioritizing, and mitigating risks (including emerging risks and threats, and the pace of rapidly evolving risks) belongs to the risk owners—management. Internal audit can provide consulting expertise without compromising its independence to add value through collaboration and problem-solving.
Most organizations implemented changes to respond to the unprecedented COVID-19 challenges. The future remains uncertain. COVID-19, without a doubt, has tested the very premises on how every organization, including internal audit, creates value. The IAVC provides a valuable and agile framework you can adopt and adapt to partner with your stakeholders to develop a culture of problem solvers.
Ultimately, the priorities vary between organizations. Therefore, the six components of the IAVC should be continuously evaluated and updated to create value, capture value, and sustain value in the context of your organization's strategic goals and mission priorities.
This series includes updated versions of articles originally published in the Institute of Internal Auditors (IIA) Magazine, The Journal of Government Financial Management (AGA), and Internal Audit 360°, an independent knowledge source for internal auditors.
For more information on the Internal Audit Value Chain (IAVC), contact:
Jonathan Ngah, CISA, CIA, CFE, CGFM.
Jonathan is a Principal at Synergy Integration Advisors, a professional services firm providing internal audit outsourcing and internal audit co-sourcing services to government institutions, private-sector, and not-for-profit organizations in the U.S. and the Asia Pacific (APAC) regions.