Extent to Which Firms Communicate Their Business Strategy with the Internal Audit Department - Research Paper Example

The paper “Extent to Which Firms Communicate Their Business Strategy with the Internal Audit Department” is an excellent example of a finance & accounting research paper. According to Simone and Brown (2010), the -increasing competition within the global business environment has significantly affected the role of internal audits within organizations. As a result, internal audit systems should follow business evolution by remaining flexible and by adjusting their function to the evolving business strategies.

In the words of Trenary (1999, p. 266), as defined by the Institute of Internal Auditors in their 1995 statement of standards for the professional practice of internal auditing, internal audit refers to an ‘independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization’. Internal auditors assess and report various issues such as compliance, risk management, and internal control deficiencies directly to the audit committee which has been appointed from the board of directors.

In terms of its strategic direction, Picket (2011) suggests that internal audits must be linked to the company’s strategic process in order to contribute to the achievement of the company’s strategic objectives and goals. In addition, Kagermann et al (2008, p. 22) state that an ‘internal audit’s objectives and activities must be aligned with the strategic objectives of the organization’. Moreover, Watts (2014) supports that internal audits should adopt and integrate the strategic planning process in order to be able to perform adjustments into strategic processes.

In other words, various researchers support that a successful internal audit process must be clearly aligned to the strategic plan of organizations. On the other hand, some researchers’ support opposed arguments regarding the strategic role of an internal audit. Bhandari and Verma (2013), argue that internal auditors should not be involved in the strategy formulation as well as implementation as these processes refers strictly to executives, middle managers as well as other external and internal consultants.