THE EFFECTIVENESS OF INTERNAL AUDIT PLANNING IN MALTESE COMPANIES: AN ASSESSMENT DANICA TONNA SEPTEMBER 2015

AGENDA 1.Introduction - Objectives of the study 2.Data Collection & Participants 3.Findings Part 1 – The Quality of the IAF & The Planning Process Part 2 – Performance Measurement & Evaluation of the IAF 4. Concluding Notes & Recommendations

INTRODUCTION IAF - scrutinised to demonstrate that it can ADD VALUE ADD VALUE Effective IAF A good IA Plan Effective IA Planning

INTRODUCTION IAF - scrutinised to demonstrate that it can ADD VALUE ADD VALUE Effective IAF A good IA Plan Effective IA Planning

INTRODUCTION IAF - scrutinised to demonstrate that it can ADD VALUE ADD VALUE Effective IAF A good IA Plan Effective IA Planning

INTRODUCTION IAF - scrutinised to demonstrate that it can ADD VALUE ADD VALUE Effective IAF A good IA Plan Effective IA Planning

INTRODUCTION IAF - scrutinised to demonstrate that it can ADD VALUE ADD VALUE Effective IAF A good IA Plan Effective IA Planning Planning is the initial stage in the audit cycle

Audits follow a process – 4 main stages PLANNINGFIELDWORK REPORTING FOLLOW-UP

OBJECTIVES OF THE STUDY 1.To ascertain the extent to which the planning process is carried out in these organisations. 2.To evaluate auditors’ assessment of the risks to be taken into account in long term planning and how such planning is aligned with the overall business strategy of the organisation. 3.To determine whether audit activities are meeting their goals and objectives through the establishment of performance measures and whether these can be further enhanced.

DATA COLLECTION & PARTICIPANTS DATA COLLECTION SECONDARY SOURCES Journal Articles/Research Documents/Reports Professional Guidelines (IIA) Dissertations

DATA COLLECTION & PARTICIPANTS DATA COLLECTION SECONDARY SOURCES Journal Articles/Research Documents/Reports Professional Guidelines (IIA) Dissertations PRIMARY SOURCES 46 ed Questionnaires 11 Interviews held with members from the IAF Multiple Research Design – Qualitative & Quantitative Methods used

FINDINGS THE QUALITY OF THE IAF & THE PLANNING PROCESS

The Setting of the IAF within selected Maltese Organisations 50%

Extent of Agreement in relation to Sufficient Pre-Planning and Co-ordination by the Internal Auditors with the Departments 85.7% - users 82.6 % - IAF

Weighting given to Planning

Staff within the IAFFrequency (n=23) Percentage In-house resources1669.6% Fully outsourced417.4% A combination of both313.0% IAF Staff Complement

Recruitment of Special Specialists

Risk Assessment

FINDINGS PERFORMANCE MEASUREMENT & EVALUATION OF THE INTERNAL AUDIT FUNCTION

Within the last 12 years418.2% 1-3 years ago313.6% 4-5 years ago00% More than 5 years ago29.1% Never731.8% The external review was not done in accordance with the Standard 29.1% I do not know417.4% 31.8%

How does your organisation measure the performance of the IAF?Frequency (n=23) Percentage Balance Scorecard 418.2% Assurance of sound risk management/internal control 731.8% Surveys/feedback from the Board, AC and/or senior management 1150% Customer/auditee surveys from audited departments 731.8% Recommendations accepted/implemented 1150% Cost savings/avoidance and improvements from recommendations implemented 418.2% Number of management requests for internal audit assurance or consulting projects 731.8% Reliance by external auditors on the internal audit activity 627.3% Budget to actual audit hours 313.6% Percentage of audit plan complete 1150% Completion of mandated coverage 313.6% Cycle time-report turnaround (end of fieldwork to final report) 522.7% Number of significant audit findings 418.2% Timely closure of audit issues 836.4% No formal performance measurement of internal audit activity 418.2%

EFFECTIVENESS OF THE PLANNING PROCESS Do you think your planning process needs improvement?

CONCLUDING NOTES OBJECTIVE 1 Extent of the Planning Process FINDINGS IAFs are managed effectively IIA Standards are tailored to the organisation’s needs Planning stage is given the necessary attention Concern – Lack of staff Improvement – Time Element – Affects performance of the IAF There is communication & feedback between the departments Attention is given to risk – Risk Based Approach – Focus on high risk areas

OBJECTIVE 2 Evaluation of Long Term risks when planning FINDINGS Strategic (LT) audit plans are not so popular - Not adequate to prepare strategic plans …with a visibility > year Short Term plans are preferred – Changing circumstances – Audit plans are not fixed Contradiction with the Risk Based approach – Organisation perceives future risks in the LT RECOMMENDATIONS A Risk Management Department to be set up in line with the setting up of an IAF

OBJECTIVE 3 Establishment of Performance Measures FINDINGS Quality Assessment & Improvement Programmes mainly through reported issues, being..supported by: - Working Papers - Customers’ Feedback - Follow-up Lack of Independent reviews – Imp for independence Staff Evaluation – Mainly through CAE, Audit Management feedback & Self Assessments RECOMMENDATIONS The regulation of External Independent Reviews on the IAF More utilisation of Performance Measures by the Maltese IAFs

Thank You