TIAPS Module 1 Audit and Assurance workbook

• Close scrutiny. The activities of public entities are rightly subject to close scrutiny by
line ministries, financial inspectors, external auditors, the business community, and
the public. This includes the work of the internal audit function and the behavior and
actions of its members. Unlike external audit reports, those of the internal audit
function are not typically made available to the public, but the expectations placed on
internal auditors to serve the public interest as inspectors and watchdogs are
generally considerable. The public may not understand what an internal auditor
does, but when things go wrong, they are often caught in the firing line.
• Political environment. The public sector environment is, above all, a political one.
There is a cyclical change of leadership, policy, and organizational direction, and
internal audit is expected to keep up. The head of internal audit must anticipate
these frequent shifts when planning the timing and focus of engagements. They
must continuously rebuild relationships and carefully navigate politics to ensure
activities are appropriately focused on organizational purpose and the public good
rather than election cycles and the personal ambitions of public officials.
• Constraints on independence. Establishing and maintaining organizational
independence can be more challenging for internal audit functions in public entities
than it is in privately owned businesses. Often the distinction between executive and
non-executive leadership is less apparent. The head of internal audit may report to
an individual or a board comprising senior managers and political appointees. In
some cases, internal audit oversight may be fairly remote. Audit committees, where
such exist, may span multiple entities, especially where there is a centralized or
shared service provider for central or local government. In addition, the use of
outsourced or shared services may increase internal audit’s operational
independence at the expense of greater remoteness from and reduced familiarity
with the activities being audited.
• Legitimate restrictions in scope. The mandate of internal audit should allow the
function access to the people, data, and resources needed to complete its
engagements. Often in the private sector, this is interpreted as an “access all areas”
mandate. Restrictions on scope amount to a limitation on independence, keeping
internal audit away from areas the governing body does not wish to be scrutinized. In
the public sector, there can be legitimate reasons for reducing scope, especially in
the interests of national security.
These and other dimensions require careful handling by internal auditors and heads of audit
functions.
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