Learn how to use key performance indicators (KPIs) to measure and improve your internal audit function, and what are some common and relevant KPIs for internal auditors.

Strong KPIs are key to successful internal audits! In addition; - Risk Coverage: it goes beyond identifying risks. It measures how deeply audits address them (thorough procedures, frequent audits for high-risk areas, comprehensive scope). Strong risk coverage leads to actionable recommendations and responsive management, ultimately mitigating risks, improving decisions, and boosting stakeholder confidence. - Timeliness: ensures relevant reports (addressing current issues) and quick action (management response). This keeps risk management a priority and avoids resource bottlenecks by efficiently allocating staff. By tracking these KPIs, internal auditors become valuable partners in risk management and drive organisational success.

Last updated on Aug 29, 2024

How do you evaluate your internal audit function using KPIs?

An internal audit function is an essential part of any organization that wants to ensure compliance, efficiency, and effectiveness of its operations and processes. However, how do you know if your internal audit function is performing well and delivering value to your stakeholders? One way to measure and improve your internal audit function is to use key performance indicators (KPIs). KPIs are quantifiable measures that reflect the critical success factors of your internal audit function. In this article, we will discuss how to evaluate your internal audit function using KPIs, and what are some examples of common and relevant KPIs for internal auditors.

Key takeaways from this article

Monitor audit quality:

Track the compliance with standards, number and severity of findings, stakeholder feedback, and results from quality assurance reviews to ensure your internal audit is top-notch. This keeps you in line with the best practices and ahead of any potential issues.
Assess risk coverage:

Evaluate how thoroughly your internal audits address risks by looking at the depth of procedures and frequency of audits for high-risk areas. This helps you make informed decisions, respond swiftly to emerging risks, and build trust with stakeholders.

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1 Define your objectives

Before you can select and track your KPIs, you need to define the objectives and scope of your internal audit function. What are the expectations and requirements of your board, management, regulators, and external auditors? What are the risks and opportunities that your internal audit function needs to address? What are the best practices and standards that your internal audit function needs to follow? By clarifying your objectives, you can align your KPIs with your strategic goals and priorities.

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Amina Muhsin

Internal Auditor | Data-Driven Efficiency & Risk Management| AI Explorer
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In my view, internal audit should be a proactive force in identifying risks and opportunities. It's not just about identifying where things might go wrong but also recognizing areas where we can add value and contribute to the organization's success. By understanding and aligning our objectives, we position ourselves as partners and this will ensure we contribute to continuous improvement of the organization.

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Hernán Valdebenito Molina

Docencia e Investigación. Capacitación y Relatorías de Auditoría, COSO, Gestión de Riesgos y Fraudes y Tributación.
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Los objetivos a considerar deben ser, al menos: - Estratégicos, o de la Organización. - Objetivos Internos, Plan de Auditoría Interna. - Objetivos de Cumplimiento del Plan. - Objetivos de Eficiencia y Eficacia. - Objetivos de Valor Agregado a los Procesos. - Objetivos de Cobertura Territorial. - Objetivos de Cumplimiento Regulatorio. - Objetivos de Calidad. - Objetivos de Satisfacción de Clientes. - Objetivos de Retroalimentación o Seguimiento. - Objetivos de Perfeccionamiento o Capacitación.

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2 Choose your KPIs

Once you have defined your objectives, you need to choose KPIs that will help you monitor and evaluate your internal audit function. These KPIs should be relevant, specific, measurable, achievable, realistic, and timely (SMART). Examples of common and relevant KPIs for internal auditors include audit coverage (percentage of the audit universe or plan completed or in progress), audit quality (level of compliance with standards, number and severity of findings and recommendations, feedback from stakeholders, results of quality assurance reviews), audit efficiency (ratio of actual to budgeted hours, number and duration of audit delays or extensions, utilization and productivity of audit staff, cost per audit hour), and audit impact (percentage of accepted and implemented recommendations, value or savings generated by recommendations, improvement in risk management or control environment, satisfaction of stakeholders).

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Eunice Nyalazi Phiri

Certified Internal Auditor (CIA)| FCCA-UK I FZICA I ACIM-UK I MBA -UCW l MBA Finance - UNZA
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Strong KPIs are key to successful internal audits! In addition; - Risk Coverage: it goes beyond identifying risks. It measures how deeply audits address them (thorough procedures, frequent audits for high-risk areas, comprehensive scope). Strong risk coverage leads to actionable recommendations and responsive management, ultimately mitigating risks, improving decisions, and boosting stakeholder confidence. - Timeliness: ensures relevant reports (addressing current issues) and quick action (management response). This keeps risk management a priority and avoids resource bottlenecks by efficiently allocating staff. By tracking these KPIs, internal auditors become valuable partners in risk management and drive organisational success.

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Hernán Valdebenito Molina

Docencia e Investigación. Capacitación y Relatorías de Auditoría, COSO, Gestión de Riesgos y Fraudes y Tributación.
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Índice de Aporte Estratégico de auditorías: Eficacia Índice de Cobertura del Plan Anual de Auditoría: Calidad Índice de Cumplimiento del Plan Anual de Auditoría: Eficacia Índice de Disminución de Recursos Económicos en auditorías: Eficiencia Índice de Cumplimiento del Ciclo de Auditoría: eficacia - Eficiencia Índice a auditorías que agregan valor a los Procesos: Eficacia Índice de Cobertura Territorial de auditorías: Eficacia Índice de Recomendaciones aceptadas: Calidad Índice de Hallazgos significativos: Calidad Índice de Satisfacción de Clientes: Eficacia Índice de Cumplimiento del Plan Anual de Seguimiento de Auditorías: Eficacia Índice de Capacitaciones realizadas al Equipo de Auditoría: Eficacia

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3 Collect and analyze your data

After you have chosen your KPIs, you need to collect and analyze your data regularly and consistently. You should establish a clear methodology and frequency for data collection, validation, and reporting. You should also use appropriate tools and techniques to analyze your data, such as charts, graphs, dashboards, benchmarks, and trends. You should compare your actual performance with your targets, expectations, and industry norms, and identify any gaps, issues, or opportunities for improvement.

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4 Communicate and act on your results

Finally, you need to communicate and act on your results effectively and timely. You should report your KPIs to your relevant stakeholders, such as the board, management, regulators, and external auditors, and explain the meaning, implications, and recommendations of your results. You should also use your results to improve your internal audit function, such as by revising your audit plan, enhancing your audit processes, developing your audit staff, and addressing any risks or deficiencies.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you evaluate your internal audit function using KPIs?

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1 Define your objectives

2 Choose your KPIs

3 Collect and analyze your data

4 Communicate and act on your results

5 Here’s what else to consider

Corporate Finance

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