How public sector can maximize the effectiveness of internal audit

As South Africa has entered a government of national unity (GNU), experts believe for this to work there need to be custodians of accountability, transparency, and efficiency.

Cobie van Antwerpen, director in risk advisory services at BDO South Africa says these custodians can be achieved through internal auditors, which play a critical role in providing assurance related to safeguarding public resources, enhancing governance frameworks, and promoting trust and confidence among stakeholders.

“However, to ensure the effectiveness of internal audit in the public sector, there needs to be strategic approaches and a nuanced understanding of the sector’s unique challenges. And that is where the Global Internal Audit Standards come into play.”

The Global Internal Audit Standards

The Institute of Internal Auditors’ Global Internal Audit Standards is explained to guide the worldwide professional practice of internal auditing and serve as a basis for evaluating and elevating the quality of the internal audit function. According to their website, the standards are 15 guiding principles that enable effective internal auditing.

The standards are organised into five domains, namely purpose of Internal Auditing; Ethics and Professionalism; Governing the Internal Audit Function; Managing the Internal Audit Function; and Performing Internal Audit Services.

ALSO READ: ‘Shocking and unacceptable’: SA Tourism recovers R35m from irregular payments

Six ways the public sector can respond to new standards:

1. Alignment with Public Sector Objectives

She says in the past internal audits overlooked the objectives of the public sector. They usually focused on the Supply Chain Management, Asset Management, and Finance to confirm controls are in place to be audit ready before the Auditor-General of SA commences its annual audits.

“To be effective in the public sector, internal auditors need to broaden their scope and focus beyond the risks related to that entity’s service delivery to include overall plans and objectives too.”

Internal auditors can better contribute to achieving broader public sector objectives by understanding and aligning the strategic goals of their respective entities.

“An understanding of the core legislative frameworks that your department or entity operates within will prove critical for the success of an internal audit unit in the public sector.”

2. Enhanced Risk Management

She believes for an effective risk management to be implemented, the chief audit executive and internal auditors must collaborate closely with chief risk officers to develop comprehensive risk management plans that respond to emerging sector and global risks effectively. As a result, this relationship will ensure that internal audit plans are credible and aligned with organisational goals.

3. Strengthened Governance and Compliance

She is of the view that internal audit functions in the public sector play a critical role in strengthening governance frameworks and ensuring compliance with laws, regulations and ethical standards.

“This requires robust internal controls, policies, and procedures to mitigate risks and safeguard public resources.”

The new standards state that adequate quality assurance must be conducted by reviewers with appropriate competencies for the area they are involved with. 

ALSO READ: Reliance on digital technology important for world and SA

4. Utilisation of Technology and Data Analytics

She has also stressed the importance of technology and data analytics in today’s digital age. She says the two are indispensable for enhancing audit efficiency and effectiveness. Internal auditors must harness automation tools, artificial intelligence, and predictive analytics to streamline audit processes and identify potential risks or opportunities for improvement.

However, government needs to upgrade the systems used for financial reporting and financial management. Systems are not integrated and integration of data analytics in audit procedures are generally less effective at departments still operating on BAS and LOGIS.

5. Promotion of Accountability and transparency

Another key reason for internal audit functions is to promote accountability by conducting independent and objective assessments of organisational performance, financial management, and compliance with laws and regulations. The standards place specific and explicit emphasis on the courage that the internal auditor should have in the public sector to protect the public interest.

In terms of accountability, ethics and professionalism, she says the standards also specifically mention how public sector internal auditors should address potential impairments related to advisory engagements considering jurisdictional requirements.

6. Investment in Professional Development

The new standards state internal auditors must prioritise training and development, including obtaining relevant certifications such as the Certified Internal Auditor (CIA). She says this can be done by staying abreast of emerging trends and best practices.