9.6 Internal audit key performance indicators

Key Performance Indicators (KPIs) for internal audit are metrics used to assess the effectiveness and efficiency of the internal audit function. These KPIs can vary based on the organization’s goals and objectives, but here are some commonly used KPIs for internal audit:

1. Audit Coverage: Measures the extent to which the internal audit function has covered the organization’s key processes, functions, and areas of risk. It can be expressed as a percentage of auditable entities or key risk areas covered by internal audit in a given period.
2. Audit Plan Completion: Measures the percentage of the internal audit plan that has been completed within a specified timeframe. It indicates the timeliness and progress of the internal audit function in executing planned audits.
3. Audit Findings and Recommendations: Tracks the number and nature of significant audit findings and recommendations made by the internal audit function. This KPI assesses the ability of internal audit to identify control weaknesses, non-compliance, inefficiencies, and other areas for improvement.
4. Follow-up and Closure of Audit Findings: Measures the percentage of audit findings that have been appropriately addressed and closed by management within agreed-upon timelines. It reflects the effectiveness of management’s actions in responding to internal audit recommendations.
5. Stakeholder Satisfaction: Assesses the satisfaction levels of key stakeholders, such as management, those charged with governance, and external auditors, with the services provided by the internal audit function. This can be measured through surveys, feedback mechanisms, or stakeholder interviews.
6. Compliance with Professional Standards: Ensures that the internal audit function adheres to relevant professional standards and guidelines. This KPI assesses the quality and compliance of internal audit activities, workpapers, and reporting with established standards, such as the International Standards for the Professional Practice of Internal Auditing (IIA Standards).
7. Staff Productivity and Utilization: Measures the productivity and utilization of internal audit staff. This can be measured by factors such as the number of audits conducted per auditor, hours spent on audits, or the ratio of audit hours to total available hours. It helps assess the efficiency and resource allocation within the internal audit function.
8. Professional Development and Training: Tracks the level of professional development and training undertaken by internal audit staff. This KPI evaluates the internal audit team’s competence, skills enhancement, and their ability to stay updated with evolving risks, regulations, and best practices.
9. Impact on Risk Management and Control: Assesses the overall impact of the internal audit function in improving the organization’s risk management practices and internal control environment. This can include factors such as reduction in control deficiencies, mitigation of significant risks, cost savings, or improvements in operational efficiency.
10. Audit Committee and Board Engagement: Measures the level of engagement, communication, and support provided by the internal audit function to the audit committee and the board of directors. This KPI reflects the effectiveness of internal audit in providing relevant and timely information to support governance oversight.