Internal and External Audit > Internal Audit, its mandate, coverage and quality

Where and When to start Internal Audit Reforms

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atseacliff:
When I started working in international development government internal audit was rarely if ever discussed as important area to focus on. More than 15 years on, no self respecting country should be without a programme developing IA laws, creating Central Harmonization Units and piloting IA units in LMs.

I used to argue against these initiatives in Eastern Europe and Central Asia as modern concepts of IA just didn't fit with the PFM priorities; or indeed the control environment. While I lost the argument over funding I have yet to see IA make an impact and the best that might be said is that reforms are useful preparatory work for the future.

I wonder whether this scepticism is correct or whether  other members have positive stories to tell?  Should development partners invest in IA reforms and if they do what is a reasonable length of time to expect a sustainable IA function to develop? Your thoughts please.

Richard Maggs:
As someone working with this for two years and more in Moldova it is difficult to see significant hard and fast outcomes from newly created internal audit units. A number of pilot audits with outside help have been successful but all to often the name is used but the game (financial control or revision) remains the same. What seems true here and in related developments is that a committed senior manager can make use of internal audit, the biggest problem therefore is raising awareness of the role amongst those that have most to gain from an effective intern audit process. Unfortunately the easiest targeted outputs are often the standards and guidance but these alone will not produce effective internal audit functions.

A more fundamental question raised is whether the practice is simply too alien to have much success in certain central and eastern European countries. I think the issue here is that all too often countries are trying to use former financial controllers in a new internal audit role. There is a massive cultural gulf between controllers and auditors and my sense is that this is too great a change particularly for those who have been in the control function for many years. Sadly another issue in countries with poorly paid staff is that financial inspection with the ability to impose administrative penalties will, like any other inspection function, encourage corruption. A change to internal audit will therefore impact peoples ability to earn as well as their mode of work. 

atseacliff:
Nicely put. All of which should make governments and their development partners think twice before launching into IA reform. Your point regarding "converting" controllers into auditors is very interesting. The chances of getting staff to change their behaviour is remote; neither do the incentives in the current system encourage reform.  A perfect example of how technocratic solutions are highly unlikely to solve deep seated institutional problems in anything other than the (extremely) long term. And I wonder whose accountable then? :)

 

Richard Maggs:
The sad fact is that no-one is really accountable in the long term. Consultants move on as do task officers in the donor institutions and of course many procurement processes deliberately ignore issues of quality. Its the length of the CV that seems to count rather than its depth.

Kind regards

Richard

John Short:
Which suggests quick fixes without change management at all levels (particulary the political level) and without building the domestic capacity to deliver will solve little and the "reforms" will remain a donor thing.  Certainly the lessons from budget reform in Albania is that the political leadership was as/more important than anything else and that the changes in processes and procedures  required time for them to be embedded and sustained and for capacity to be built to implement the reforms.  10 years on and it will soon be time for them to say good bye to us all!

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