Strategic planning practices in selected Maltese internal audit functions : an evaluation

Abstract

PURPOSE: The main objective of this study is to evaluate the nature and extent of strategic planning practices within Maltese in-house internal audit functions as proposed in the Institute of Internal Auditors’ practice guide on Developing the Internal Audit Strategic Plan. The relevance and challenges of internal audit strategic planning will be explored. DESIGN: The objectives are addressed through the collection of primary data via a qualitative method, comprising semi-structured interviews. The research sample includes 10 interviews with internal audit executives, and 3 interviews with audit committee chairpersons. Participants in the study are Maltese Listed Entities, having an in-house internal audit function. FINDINGS: The findings indicate that the strategic value of internal audit in the local context is being upheld but has not been fully endorsed. The application of a formal strategic planning process in local IAFs is lacking, but strategic planning practices are still applied. Internal auditors gave mixed views on what they regard as the Internal audit strategic plan, but all respondents agree that it must be risk-based. The most common and important strategic planning practice is the establishment of the mission, vision and long-term objectives of the internal audit function, which are aligned with the business’ long-term objectives. CONCLUSIONS: The study concludes that the nature of strategic planning practices in local IAFs varies across industries. IAFs within the financial services industry have a more robust and formal planning process than other IAFs operating in non-financial services, mainly due to industry requirements and regulations. Nonetheless, risk-based internal audit planning, a key strategic planning practice, prevails. Finally, it was found that the extent of strategic planning practices within IAFs depends on the availability of resources, which is a major challenge in local IAFs. IMPLICATIONS: This study emphasises the importance of internal audit planning, most importantly strategic planning for the effectiveness of the IAF. It also promotes the importance of involving internal auditors in the business strategic planning process to enhance the strategic value of internal audit. This ensures the development of a close working relationship between the internal auditors, the Board of Directors and/or management.