Today's business landscape creates some tricky terrain for organizations to navigate. Heightened scrutiny of boards and management, and transformational internal and market forces are the rule, rather than the exception. In this environment, a corporate governance assessment can yield significant value for organizations. Moreover, it enables internal audit to satisfy the requirements of Standard 2110: Governance.
Corporate governance is the system of rules, practices, and processes by which an organization is controlled and directed. It sets the foundation not only for business protection and strategic performance, but also for the confidence of the markets, investors, regulators, and other key stakeholders. Effective corporate governance is a powerful driver for achieving strategic objectives in dynamic environments while supporting a strong risk culture (see "The Value of Corporate Governance" on page 51).
LAYING THE GROUNDWORK
Determining whether strong corporate governance practices are in place entails taking a hard look at big-ticket issues such as the board's and the executives' roles and practices, how leadership sets and agrees on strategy, how that strategy translates into overall action plans, how those plans are managed, and how progress is measured against goals. Performing this analysis has enormous advantages, but there is a potential catch. This is an assessment of the top of the organization--its board, management, business strategy, and risk management and compliance functions. The return is high, but so are the risks to internal audit. Planning, execution, and reporting must be aligned to the broad based stakeholder group so internal audit's findings and recommendations are fully supported and acted upon. That makes it imperative that corporate governance audits are well planned and skillfully executed. Internal audit must obtain the necessary buy-in at the highest levels, provide excellent communication and project management throughout the audit, and ensure it has the right expertise focused on the review from the start through the final deliverable.
As chief audit executives consider these issues, they should keep in mind the expectations of key stakeholders such as the board, C-suite, and business unit management. Without stakeholder commitment--including making time for interviews, reviewing results, and implementing improvements--the audit can't succeed. By seeking high-level input and perspective early on, internal audit can respond to...