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The public accounting profession broadened the array of professional services it provides with the development of a new group of services – Assurance Services – to complement financial audit and consulting services. This expansion of services recognized the changing realities of organization existence, and the inability of traditional attest audit services to fully meet contemporary needs. The advent of Assurance Services posed a fundamental dilemma for internal auditors, but also a magnificent opportunity. Internal audit is specifically named as one of the primary Assurance Services – and indeed has become one that public accounting firms have pursued actively. If internal audit services can indeed be provided by auditors who are not "internal" (employed by the organization they audit) the fundamental premise of fifty years of internal audit tradition is challenged. Also challenged is the appreciation of the fundamental difference in objectives between first party and third party auditing activities. An organization audits itself (first party) in order to improve its ability to meet its objectives – an organization contracts for an external audit (third party) in order to prove to others it meets a set of standards. Those organizations that focus all their audit and assurance efforts on comparison to standards and reporting to others, rather than improving their own capabilities to meet broad ranging business objectives, may have lost sight of their fundamental business purpose. Many organizations have proven their ability to report favorable results even though their businesses in reality did not achieve favorable results! Internal auditors are indeed at the proverbial fork in the road. Continuing on the traditional internal audit path may lead to a future where internal audits are defined simply as Assurance Services, and performed by designated "auditors" both internal and external with great variation in skills and capabilities. Unfortunately, the need for compliance with the Sarbanes-Oxley Act has compounded this problem as Board of Directors may easily view external accounting firms as "more capable" and "more able to protect the directors" than their own organization's internal auditors. However, there exists an alternative path which could lead to a future where internal auditors redefine, revitalize and expand their skills and perspectives to match contemporary needs and become a truly critical component of the organization's governance structure. Ahead on the traditional internal audit path is a very uncertain future for "internal" internal auditors as traditional internal audit activities are absorbed by other organizational functions and external entities. But ahead on the alternative path is the opportunity for expansion of both mission and methodology, to seize on the broadened concept of assurance services and apply it to a broader view of organizational needs. The future belongs therefore not to traditional Internal Audit, but to Internal Assurance. Adopting an Internal Assurance perspective maintains the value added aspects of traditional attest oriented internal audit activities while vastly expanding value added capability. An Internal Assurance function includes and strengthens the contribution of reactive, independent, compliance, financially oriented audits by correctly applying the attest audit model. It directly acts on organization enhancement efforts by implementing a coactive (partnering) audit methodology. Internal Assurance expands rather than limits internal auditors and the services they provide.
Internal Assurance – in step with the future.
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Tongren and Associates
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