How to Measure Internal Audit Performance

How to Measure Internal Audit Performance

Ever-increasing cybersecurity threats have made data security a staple in all businesses that transmit, manage, or store sensitive data. However, many companies struggle with security when it is time to carry out IT audits.

To determine the effectiveness of your risk management program, it is crucial to measure your organization’s internal policies against the recommended industry standards and regulatory requirements.

Why Measure Internal Metrics?

Measuring internal metrics helps the compliance team to determine how to allocate resources effectively. By measuring the metrics, you can uncover potential security lapses resulting from lack of proper resource allocation. For example, if an internal audit uncovers that the organization’s secure data access protocols have not been changed as expected every 30 or 60 days, IT may be required to program automated password change prompts for employees over regular intervals. 

Metrics also help to measure the effectiveness of a firm’s compliance program by tracking various data. Examples of data you can track include:

  • The number of attempted and successful intrusions made over a particular period
  • Mitigation measures deployed over a particular time
  • Compliance audit scores of various departments

How to Set Internal Audit Metrics

Your organization’s stakeholders can play a role in defining the internal metrics that should be measured to ensure compliance.

Various stakeholders may consider different metrics important than others. For example, internal audit metrics may be more important to the audit committee than the Board of Directors. On the same note, financial risks may be important to the Board of Directors than the audit committee.

Therefore, to determine the proper metrics to measure, you should consult all internal stakeholders to know what is important for them.

Defining Metrics from Audit Policies and Procedures

Your audit team should comprise of representatives from every department of the organization. After creating the team, go through the list of the metrics that each department would like to measure to find out those that align across the organization.

For example, if your organization is required to be HIPAA and PCI DSS compliant, failure to comply with them could lead to huge fines or penalties. These repercussions would be felt across all departments. Therefore, any metric that focuses on industry or government regulatory requirements should be given prominence.

On the other hand, the c-suite and audit committees may also want to reduce external audit fees by opting for internal audit processes. Failure to measure this metric may not have a big repercussion on every department of the organization.

The compliance manager should prioritize the metrics based on the business objectives to ensure the company is moving in the right direction in regards to regulatory compliance.

How to Audit Your Compliance Metrics

As the company adopts new technologies due to scaling or security concerns, it is important to define the risks that come with the technologies. Platforms like Infrastructure-as-a-Service (IaaS) can greatly increase an organization’s efficiency and capability for storing data. However, these platforms also have inherent security challenges that must be addressed regularly.

Your internal audit metrics should be aligned with integrated information security and business risks to strengthen your bottom line and compliance.

Internal Audit Program Metrics to Measure

Below are five important internal audit metrics you should be measuring:

i) Satisfaction rate among internal stakeholders

For internal stakeholders, the success rate of risk mitigation strategies is important. When designing your compliance audit program, make sure the scope and objectives cover the success rate of the program.

For example, when you switch to using a new SaaS application, the internal audit should indicate how effective the application is and whether it meets the required data security storage regulations such as PCI DSS. This information will be crucial in designing your risk mitigation strategy.

ii) Financial value of the internal audit

If you are using internal audits to reduce external costs, your metrics should provide insight into how much you are spending. By measuring this metric, you can know whether your compliance costs are increasing or decreasing by the year.

For example, you can manage vendor risk to get visibility on the third party providers that provide various services to your organization. By monitoring internal audit processes, you can document the control effectiveness of the vendors and compare it to their service level agreements (SLA).

iii) How the performance was reported

Human errors can determine the outcome of internal audits. Therefore, you should find a solution that removes human errors in the internal audit processes. One easy way of doing this is by using automated solutions.

There are various software that can automate internal audit processes to determine the compliance status of your company at any particular period. Some software programs can also identify gaps in compliance requirements, which can be crucial to preventing serious financial repercussions that may result from fines or penalties.

Automated solutions can process huge amounts of data and extrapolate the information you need to provide a clear view of your organization’s compliance status. Visual reports can be generated for internal auditors, who can then advise respective managers on compliance issues.

iv) Audit plan coverage

The Board of Directors and the C-suite will definitely be concerned about the cost of the complete external audit program. However, the program can be instrumental in preventing data breaches.

However, security risks are always evolving. Therefore, organizations that rely on traditional point-in-time audits may be at risk of emerging threats. To prevent this, organizations can use automated solutions to continuously monitor their data environment and initiate mitigate procedures whenever risks are detected.

Author Bio

Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity’s success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and ElectricalEngineering from MIT.