NAO identifies gaps in government approach to internal audit

THE GOVERNMENT is not getting the most of the £70m it spends on internal audit, a report by the National Audit Office has found.

The report into the effectiveness of internal audit in central government found that the service does not always focus on the right issues and it is often not of sufficient quality to be useful in decision-making.

“Good internal audit should be the ‘eyes and ears’ of senior management, giving honest and clear information. However, in central government, it is not delivering consistently at this level,” said Amyas Morse, head of the NAO.

Although 84% of respondents to an NAO consultation considered internal audit added some or substantial value to their organisation, they had concerns over the depth of insight, relevance and underlying execution of internal audit work.

According to the NAO, Treasury guidance on what internal audit should deliver is not sufficiently specific, leading to expectations of internal audit being unclear.

“There is little consistency in the application of standards. Variations in quality and coverage mean that the NAO often cannot take assurance from internal audit work, and it is often of insufficient scope or quality for the spending watchdog’s external audit work,” the report said.

Users of internal audit identified particular gaps in such areas as the usefulness and relevance of reports; the expertise of staff, including expertise on IT-based information systems; the identification of efficiencies in the organisation; and the ability to offer advice to senior management.

Responding to the report, Ian Peters, chief executive of the Chartered Institute of Internal Auditors (CIIA), said the government needs to address three key areas if it is to improve its internal audit function.

“The need for consistent application of internal audit standards and the development of appropriate guidance; the need to improve the relationship between internal audit and management at executive and non-executive level; the need to support internal audit through investment in appropriate professional development,” Peters said.

Related reading