Audit performance measures

Like any function or process within an organization, appropriately developed audit performance measures help to drive results, performance, quality and continuous improvement.

Internal audit should also have its own set of performance measures or key performance indicators.

Internal audit performance measures could include:

Quality

• Customer/process-owner satisfaction scores from auditees
• Audit committee and management evaluation scores
• External audit evaluation score from company’s external auditor
• Upward feedback scores on CAE and internal audit managers from internal audit staff
• Percentage of internal audit staff with CIA or other relevant certifications
• Performance evaluation scores on internal audit staff
• Control breakdowns/deficiencies in areas recently reviewed by internal audit
• Internal control scorecard results by major area within the ompany
• Results of internal and independent quality assessment reviews

Cost

• Percentage of fully loaded internal audit cost as a percentage of company revenues and assets
• Actual cost per internal audit report and average
• Average cost per internal auditor
• Cost per audit hour in total
• Cost per audit hour based upon actual audit work only, excluding administration
• Travel costs of the internal audit function and average cost per trip
• Training cost and training cost per auditor
• Technology licensing costs and other outside costs
• Costs related to use of outside resources

Timeliness

• Report cycle time from completion of fieldwork to issuance and finalization of report
• Budgeted hours versus actual hours by individual audit
• Percentage of audits called for in the audit plan that are not yet complete
• Unresolved/incomplete recommendations from prior audit reports
• Average length of audit assignment in person hours or weeks
• Major risk areas not audited in the last year
• Aging/status of open, unresolved audit findings (especially those beyond their due date)

Other

• Degree of reliance on internal audit work by external auditor• Turnover rates
• Percentage change rate in the annual audit plan
• Percentage of assets, revenues, locations, business units, etc., covered by the internal audit plan
• Linkage of key risks to specific skills of the internal audit team
• Degree of IT-related audit work relative to total audit effort

A selected number (approximately six to 12) of key audit performance measures should be agreed upon between internal audit, the audit committee and management.

Having too many measures is not productive in the long run, nor is utilizing too few. Also, a balanced scorecard of measurements focusing on cost, quality and timeliness will help to drive the most effective result for a company.

Of course, companies should develop their own specific measures that best meet their needs.

Reporting of these measurements at least annually is appropriate in some cases. However, certain measurements might be reported at each audit committee meeting or more frequently than once a year. Audit performance measures should cover compliance with internal audit standards.