Building trust: The role of internal audit in 2024

Rebecca Watson Date published: Feb 12, 24

Most people recognize that trust is the basis for any successful relationship – personal or professional. The importance of nurturing this key connection between an organization and its customers or service users cannot be underestimated. But, as we revealed in our latest 2024 Trends report, this year trust will be particularly significant to success.

And, among the many instrumental people who will assist in driving this, there is one that works diligently and consistently to maintain and improve trust but isn't always in the limelight. That modest but mighty voice, is the internal auditor.

Internal audit faces a busy year. In January the International Internal Audit Standards Board (IIASB) issued their latest framework with requirements for internal audit (effective from 2025) which will influence how internal audits are conducted globally. And while there are many changes to consider the IIASB make no apologies for putting an increased focus on stakeholders and public interest.

In addition, the Public Company Accounting Oversight Board (PCOAB) have introduced a series of amendments to auditing standards specifically in relation the internal audit function that will impact all audits of financial statements for fiscal years ending on or after December 15, 2024.

Never before has the internal auditor’s role been so multifaceted and pivotal. As an independent assurance entity, internal audit paves the way for organizations to build a brand synonymous with trust. So, exactly how and why are our internal audit colleagues to be so important in the coming 12 months?

Compliance

With 2024 anticipated to be no less dynamic on a political, economic and geopolitical front, keeping pace with regulatory changes is more critical than ever. Internal audit teams possess deep knowledge of regulatory requirements and industry best practices. Their expertise supports organizations to ensure that controls align seamlessly with relevant regulations, thereby minimizing exposure to compliance risks.

Internal auditors enable organizations to evaluate their compliance status and pinpoint any discrepancies or instances of non-compliance. This proactive approach not only minimizes the risk of penalties but also showcases the company's dedication to lawful operations, bolstering consumer trust.

Protecting margins

In a chapter penned by Ideagen Chief Financial Officer, Emma Hayes, our 2024 Trends research uncovered a hyper focus this year on protecting the top and bottom line. Businesses have exhausted their reserves, and any wriggle room there might have been, is now more of a straitjacket. The role of internal audit in supporting management of operating margins cannot be underestimated. The meticulous evaluation of monetary and operational controls conducted by internal auditors helps identify inefficiencies and risks to resources - be that financial, human, property or products. Highlighting these means organizations can take necessary corrective measures, optimizing their operations and subsequently improving their operating margins.

Similarly, a strong internal audit function can help organizations avoid costly penalties and reputational damage associated with non-compliance or fraud. Fraud poses a significant threat to any business, inflicting financial losses, reputational damage and eroding consumer trust. One of the biggest examples of accounting fraud in history, the WorldCom scandal, which overstated assets by $11bn, was uncovered by its internal audit function. By conducting objective risk evaluations, analyzing processes and assessing systems, the internal audit function plays a significant role in fraud prevention. Hence, the internal audit serves not only as a trust-enhancing tool but also as a critical factor in the financial success of a business.

Risk mitigation

Every business faces a multitude of risks that can significantly impact consumer trust. That's nothing new, we highlighted a need for a 'sliding scale of risk' this time last year in our 2023 predictions report. But the manner in which these risks are managed plays a crucial role in shaping the perception of a company's reliability. This is where the importance of an internal auditor is fully realized. Serving as an unbiased assessor, they meticulously examine the risk management processes in place.

By identifying potential hazards and suggesting effective strategies for mitigation, internal audit ensures that the company is well-prepared to navigate through the ever-evolving business environment. For example, continued geopolitical and economic instability is expected to pose significant challenges to businesses in 2024. A robust internal audit function, strengthens a company’s ability to cushion themselves from unanticipated threats, such as sudden policy changes or economic downturns, which could result in substantial financial losses and irreparable damage to reputation.

ESG

With consumers increasingly valuing sustainable and ethical business practices, and a plethora of new legislation on the horizon, ESG is high on the agenda for most boardrooms. Internal auditors are central to organizations accurately reporting their ESG commitments. This is not just about preventing ‘greenwashing’ - it also presents an opportunity to create value. Our 2024 Trends report identified that significant number of consumers consider themselves 'ethical spenders'. Leveraging the expertise of internal audit teams can help organizations identify opportunities to enhance sustainability initiatives, mitigate risks and ultimately drive growth.

The ultimate competitive advantage

Internal auditors are not “ticking boxes”, they are delivering real value. Leveraging the expertise of your internal auditors can get you closer to your organizational aims and give you with an edge over your competitors. The role of the internal auditor in 2024, and beyond, is not only pivotal but multifaceted. They are a guardian of trust, fostering relationships with customers with a value extending far beyond compliance. They are a strategic partner, enabling organizations to navigate the complexities of the modern business landscape confidently.