Measuring Performance of Internal Auditing: Empirical Evidence

Abstract

This article summarizes undertaken analysis of the performance measurement in the area of internal auditing. Reasons for choosing the mentioned topic were influenced by two main factors. First of all, performance measurement today is facing a considerable increase of interest in this subject due to a shift from industrial to knowledge economy. Well designed organizational performance measurement system enables effective translation of strategy into actions, multidimensional view of performance, and proper reaction to strategic issues, faced by the organization. Secondly, the role of internal auditing in overall managerial spectrum has significantly increased over the past 10 years. Currently, internal auditing represents not just a detective mean of control focused mainly on financial information and compliance (as it was on the early stages of its appearance), but rather a proactive function in organization, encompassing assurance and consulting services. Internal audit adds value through the usage of structured and systematic approach, enabling to evaluate and improve the effectiveness of risk management, control, and governance processes. On the other hand, due to its specific position in organization and the nature of internal audit itself, measurement of this activity is a challenging issue. Following a formulated concept of “value added” approach of internal auditing, performance measurement in this area should reveal the effectiveness and the efficiency of internal audit services. Absence of the comprehensive and unified taxonomy has inspired undertaking a particular research in this field. Results of the survey have highlighted the importance of the measurement of internal audit function to the stakeholders of internal auditing (audit committee, CEOs, other senior management and external auditors). Furthermore, survey results have supported the hypothesis that performance measures could be reasonably integrated into three identified dimensions of internal audit, i.e. input, process and output. Besides, it is worth mentioning that there is a strong correlation between performance measures, which could be / are used to measure particular dimensions of internal audit. This observation justifies the principle of interaction between dimensions and it is consistent with a general concept of cause-effect chain identified in contemporary performance measurement literature.