Lord Walker missed the opportunity to specify how internal audit can improve corporate governance, says IIA

The Institute of Internal Auditors (IIA) welcomed the thrust of Sir David Walker’s recommendations on corporate governance but criticised his lack of attention to the role of internal audit.

The IIA, expressed disappointment at what they called a “failure to clarify the vital contribution internal auditors can make in providing non-executives with the knowledge they need to deliver sufficient challenge to their boards”.

The Institute’s Chief Executive, Dr Ian Peters said: “We welcome Sir David’s focus on risk and control and his comments that internal audit was not part of the problem which caused the financial crisis. However, in failing to distinguish between external and internal audit, we believe that he has missed the opportunity to specify how internal audit can be part of the solution in improving corporate governance in the financial sector.”

He added: “Sir David’s report defines internal audit too narrowly as a historical reporting function. Whilst this may be true of external audit, internal audit is increasingly forward looking and can help the board, audit committee and proposed risk committee to focus on the current and future risks to the organisation.”

“The report’s final recommendations rightly focus on the responsibility that should be borne by non-executive directors. We now need to discuss how internal auditors can practically support non-executives in their challenge and oversight roles.”