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/ Canadian Government Executive
// October 2016
Internal Audit
The auditor as Agent of
Organizational Learning
Luc
Juillet
W
hile internal auditing has
been considerably strength-
ened in most jurisdictions
in the last decade, auditors
must continue to look to the future and
consider how they can deliver even more
value to their organizations, helping them
innovate and perform better. In today’s
fast-changing environment, public manag-
ers are asked to become more innovative,
to meet higher standards of accountabil-
ity and to deliver better value, often with
fewer resources. This demanding environ-
ment is also challenging internal auditors.
As the public sector seeks to make the
most of its internal auditors in the years
ahead, what kind of choices should be
considered? What can be done to help in-
ternal auditors deliver even more value in
the future?
At the request of the Government Inter-
nal Auditors’ Council of Canada (GIACC),
my colleague Catherine Liston-Heyes and
I recently completed a study on these
questions. We reviewed the academic
and professional literature, conducted a
national survey of public sector internal
auditors, and talked to more than fifty
chief audit executives, audit committee
members and executives with program
responsibilities. This work was recently
published in a report entitled The inter-
nal auditor as an agent of organizational
learning: Enhancing the value of internal
auditing in the public sector. Here are
some of our findings.
Comfort and learning are
the backbone of internal
auditing value
Internal auditing essentially delivers
value in two ways: (1) it provides com-
fort and reassurance, mainly to the most
senior officials, about the good steward-
ship of organizational resources, acting
as a review and accountability function
and (2) it fosters organizational learn-
ing about how to improve management
controls, governance processes and risk
management through a range of audit
and advisory services that are particular-
ly beneficial to managers and executives
involved in operations.
While it is more common to think about
the contribution of internal auditing to
accountability, its role in organizational
learning is equally important and public
organizations should pay more atten-
tion to it. In fact, while the provision of
reassurance remains essential, our study
found that the elements of audit services
that are currently considered to be of
best value by most auditors, chief audit
executives and non-audit executives are
those more closely associated with or-
ganizational learning. Remarkably, im-
proving internal auditors’ contribution
to organizational learning is the most
promising way to enhance the value of
internal auditing to the public sector in
the future.
Improving the value of
internal audit services
To help their auditors deliver more learn-
ing value, many organizations should
consider changes to current audit poli-
cies and practices. Depending on their
circumstances, organizations will un-
doubtedly need to make different choices
to improve their auditors’ contribution to
organizational learning. There is no sin-
gle way forward. But here are a few areas
where our study identified real potential
for value-adding changes.
1. Expanding the use of
advisory services
63% of our survey respondents believe
that they could contribute more to their
organization if they offered more advisory
services. Only 34% said that assurance ser-
vices could offer more value than advisory
services. In fact, most of our interviewees
pointed out that, through advisory ser-
vices, auditors can provide timelier — and
thereby relevant — assistance to manag-
ers and that there is significant value in
helping prevent future problems, particu-
larly through some judicious advice on key
transformation projects. Unfortunately, in
some jurisdictions, auditors thought that
internal guidance excessively restricted
the provision of advisory services, preclud-
ing a better balance of assurance and advi-
sory services.
2. Improving the
communication of audit
findings
Ineffective communication, especially
through formal audit reports, was also
widely believed to be an area needing im-
provement. Effective communication is es-
sential to ensure that auditees learn from
audit results and use them to improve their
practice. At the moment, some organiza-
tions used standardized formats that can be
highly constraining and require long writ-
ing and vetting processes that consume a
lot of audit resources and hinder auditors’
ability to provide timely feedback.
These organizations should consider
moving to shorter and more strategic audit
reports, with fewer and less prescriptive
recommendations focused on core issues.
Internal auditors should also be encour-
aged to experiment with alternative, more
dynamic methods of communication,