If there's angst within corporate circles over the performance of the internal audit department, it could have as much or more to do with expectations as with performance.

That's the conclusion of the latest PwC State of the Internal Audit Profession study, which polled 1,900 internal auditors, senior executives, and board members to assess the internal audit function globally. The study found those within the internal audit department and those with a stake in the success of internal audit are not always operating under common expectations or perceptions of value. It's the latest in a series of internal audit surveys and studies that call on the internal audit profession to continue to evolve to meet changing and rising expectations.

The different stakeholder groups are relatively agreed, for example, that the internal audit function should focus on critical risks, but they differ in their assessment of how well internal audit executes on that duty, with only 63 percent of senior management giving internal audit positive marks compared with more than 80 percent of CAEs. The study found similar differences in areas such as alignment of the audit plan, having internal audit serve in a proactive or advisory role, managing relationships, and other areas.

“There's a clear misalignment of expectations between various stakeholders groups,” says Jason Pett, PwC internal audit leader. “When there are not clear expectations of what internal audit should be doing, it causes confusion around the focus of the function and leads to an inability to build capabilities toward a particular purposes. Chief audit executives need to work through that.”

Only 49 percent of senior management and 64 percent of board members said they believed internal audit was “performing well,” and even chief audit executives gave a less than enthusiastic review with only 65 percent saying internal audit performed well. Internal audit lost a bit of ground with board members in terms of those who see the internal audit function as delivering “significant value” to the organization. In 2013, 79 percent of board members said they saw significant value in internal audit compared with 68 percent in 2014. Among senior management, only 45 percent see significant value in internal audit, virtually flat from 44 percent in 2013. 

Pett says the study results deliver a clear mandate to CAEs to better manage the expectations of stakeholders so all are operating under a common view of what internal audit does and delivers. “The clear theme is they need to drive alignment early,” he says. “Get stakeholders together and understand where internal audit is heading. You're not going to get perfect agreement, but you do need to get alignment. Understand the path you are on, and then build your capabilities to meet those expectations.”

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