AUDIT DIRECTOR ROUNDTABLE

Calibrating Stakeholder
Expectations (CASE)
Diagnostic
A 360 Assessment of Internal Audit

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The Audit Director Roundtable has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and
the Audit Director Roundtable cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Audit Director Roundtable is not engaged in rendering legal,
accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services
are advised to consult an appropriate professional. Neither The Corporate Executive Board Company nor its programs are responsible for any claims or losses that may arise from a) any
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Different expectations
from Internal
Audit stakeholders
compounded by
divergent viewpoints for
each stakeholder create
difficult interactions.

DOES THIS LOOK FAMILIAR?

Expectations by Stakeholder

Audit Committee

Senior Management

Line Management

Provide assurance on:

Risk management
Asset protection
Legal/regulatory
compliance

Provide assurance on:

Internal controls
Process efficiencies
Performance expectation

Provide:
Advice on mitigating risks
and control design
Support for revenue
growth via consulting
work

Alignment Between Internal Audit and Stakeholders

2 Unreasonable Expectations
We need to
greatly improve
productivity.

Improve it?
Were already
best-in-class.

1 Shared Vision and Goals

You read
my mind.

Lets make
this happen.

Aligned

Perception
of Importance

4 Deep Loss of Trust

3 Frustration and Puzzlement

He just doesnt
have a clue..

I cannot work
with this guy.

You just
dont see the
big picture!

Why are you

wasting my time
discussing this?

Misaligned

From the AUDIT DIRECTOR ROUNDTABLE

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Misaligned

Aligned

Perception of Audit Performance

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The Audit Director

Roundtable would like
to express its gratitude
to the following member
organizations for their
participation in the CASE
Diagnostic.

A GROWING LIST OF PARTICIPANTS

Selected List of Participating Companies as of March 2010

Alliance Data Systems

Health Net, Inc.

Reynolds America

Australia Post

Horace Mann Educators Corp.

Rockwell Collins, Inc.

Bank of Ireland

IKON Office Solutions, Inc.

Santos Ltd.

Boston Scientific
Corp.

Molex, Inc.

Starwood Hotels & Resorts

Worldwide, Inc.

British AIrways

NASD

Synovus Financial Corp.

Fidelity National
Financial, Inc.

Nestl USA, Inc.

Transocean, Inc.

Harley-Davidson, Inc.

Pilkington plc

YUM! Brands, Inc.

From the AUDIT DIRECTOR ROUNDTABLE

of the FINANCE AND STRATEGY PRACTICE
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2010 The Corporate Executive Board Company.
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A NEW APPROACH TO GAUGING BUSINESS ALIGNMENT

1

Building the CASE

Diagnostic
Q1 2006Q2 2006

Survey Development and Analysis

Analyzing Individual
Member Performance
Q3 2006Q4 2009

Company-Specific Analysis and Review

Benchmarking CrossMember Performance

Q1 2007Q4 2009

Aggregate Participant Analysis

Survey Mechanics

Representative Questions Addressed

Representative Questions Addressed

1. Identify attributes of an effective

Internal Audit department in
consultation with an advisory panel
of CAEs

1. What are the principal opportunities

to improve our Internal Audit
departments performance?

1. W
 hich Internal Audit department
attributes correlate highly with
stakeholder perceptions of
effectiveness?

2. Develop and pilot the survey

3. A
 dminister the survey to more than
1500 respondents
4. Develop and integrity-test central
data set

2. H
 ow does our organizations
performance compare to our peers?
3. H
 ow well do our audit departments
perceptions align with stakeholders
perceptions?

5. P
 erform cross-tabulations and
regression analysis of data

2. H
 ow well do Internal Audits
perceptions align with stakeholders
perceptions?
3. In which attributes should CAEs
invest more? In which should they
invest less?

Profiting from a Wealth of Experience

The Roundtable drew on the experience of other Corporate Executive Board programs that have recently conducted alignment surveys on behalf of the
following executives:

Chief Financial Officers

Chief Procurement Officers

Chief Legal Officers

Chief Information Officers

Chief Technology Officers

Chief Communications Officers

From the AUDIT DIRECTOR ROUNDTABLE

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BY THE MEMBERSHIP, FOR THE MEMBERSHIP

The CASE Diagnostic enables self-assessment on critical audit competencies

Evaluation Criteria
Importance
7 = Extremely High Importance
6 = Very High Importance
5 = High Importance
4 = Important
3 = Low Importance
2 = Very Low Importance
1 = Extremely Low Importance
Effectiveness
7 = Highly Effective
6 = Effective
5 = Somewhat Effective
4=N
 either Effective nor Ineffective
3 = Somewhat Ineffective
2 = Ineffective
1 = Highly Ineffective

Survey Participants
AC = Audit Committee
SM = Senior Management
LM = Line Management
IA = Internal Audit
The CASE Diagnostic is a Web-based survey tool
allowing members to self-assess performance
on 35 critical Internal Audit competencies. The
CASE Diagnostic also serves as a comprehensive
terrain map of Internal Audit, providing a clear
understanding of the central elements of a wellaligned Audit organization.
For each attribute, select the value that best reflects
your current state using the grading scales indicated
below.
The top score is for:
I = Importancehow critical the attribute is to your
organization.
The bottom score is for:
E = Effectivenessthe effectiveness with which your
Audit organization currently performs this activity.

I. Audit Breath
AC

SM

LM

IA

I.Financial Risk Assurance

Internal Audit effectively provides assurance that financial risks
(including financial reporting risk) are sufficiently mitigated
II.Compliance Risk Assurance
Internal Audit effectively provides assurance that the risk of noncompliance with laws, regulations, standards, and company policies
is sufficiently mitigated
III.Operational Risk Assurance
Internal Audit effectively provides assurance that operational risks are
sufficiently mitigated
IV.Strategic Risk Assurance
Internal Audit effectively provides assurance that risks to the companys
strategy are sufficiently mitigated.
V.Fraud Risk Assurance
Internal Audit effectively provides assurance that fraud risks are
sufficiently mitigated
VI.IT Risk Assurance
Internal Audit effectively provides assurance that IT risks are sufficiently
mitigated
VII.Consulting Services
Internal Audit serves as a valued partner in providing consulting
services (including process improvement, special projects, and
implementation services)
VIII.Cost Recovery Auditing
Internal Audit effectively identifies cost recovery opportunities during
the audit engagement

From the AUDIT DIRECTOR ROUNDTABLE

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2010 The Corporate Executive Board Company.
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BY THE MEMBERSHIP, FOR THE MEMBERSHIP (CONTINUED)

II. Risk Assessment

AC

SM

LM

IA

I.Comprehensive Risk Coverage

Internal Audit effectively provides assurance that a broad array of risks facing the company are sufficiently
mitigated
II.Key Risk Focus
Internal Audit spends a significant amount of time providing assurance on the most critical risks facing the
company
III.Risk Prioritization
Internal Audit works to solicit the input from the Audit Committee, senior management, and External
Audit to create an audit plan that effectively prioritizes the critical risks facing the company
IV.Risk Management Process Integration
Internal Audit coordinates with its stakeholders to effectively integrate the companys risk management
processes into the annual audit plan
V.Emerging Risk Monitoring
Internal Audit is considered a partner in identifying and monitoring emerging risks to the company
VI.Adaptive Planning
Internal Audit successfully makes adjustments to the audit plan during the year to address changing and
emerging risks
VII.Organizational Risk Responsiveness
Internal Audit assesses the companys ability to promptly respond to crises and emerging risks

From the AUDIT DIRECTOR ROUNDTABLE

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BY THE MEMBERSHIP, FOR THE MEMBERSHIP (CONTINUED)

III. Service Orientation
AC

SM

LM

IA

I. Breadth of Audit Engagement

Internal Audit provides coverage for a broad range of risks facing the business unit/function during the audit engagement
II.Depth of Audit Engagement
Internal Audit provides in-depth analyses of key risks facing the business unit/function that adequately supports
its conclusions during the audit engagement
III.Stakeholder Input Solicitation
Internal Audit proactively requests managements input when scoping the audit, performing the audit, and reporting results
of the audit
IV.Draft Report Turnaround Time
Considering the nature of fieldwork and analyses, Internal Audit creates and shares the initial draft report shortly after
completing fieldwork
V.Quality of Audit Reports
Internal Audit creates high-quality audit reports that are insightful and helpful for improving the business
VI.Timely Notification of Issues
Considering the nature and significance of the results, Internal Audit provides timely informal and formal notice
of significant issues to the appropriate stakeholder at the right time
VII.Clarity of Communication
Internal Audit effectively communicates in the vernacular of the business
VIII.Project Execution
Internal Audit consistently meets or exceeds promised timeline targets for all engagements
IX.Receptive to Feedback
Internal Audit consistently responds to input and feedback during and after the audit engagement
X.Quality of Audit Committee Reports
Internal Audit provides high quality reporting to the Audit Committee that clearly communicates the effectiveness of risk
management, control, and governance processes
XI.Courtesy and Professionalism
Internal Audit staff is consistently courteous and professional throughout the entire audit engagement
From the AUDIT DIRECTOR ROUNDTABLE
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BY THE MEMBERSHIP, FOR THE MEMBERSHIP (CONTINUED)

IV. Stakeholder Partnering
AC

SM

LM

IA

I. Business Environment Comprehension

Internal Audit possesses a well-balanced understanding of the overall business environment to perform its function within
the company
II.Business Operations Comprehension
Internal Audit possesses a firm understanding of the day-to-day operations of the business to perform its function
III.Technical Audit Expertise
Internal Audit employees possess solid technical audit and analytical skills
IV.Control Issue Resolution
Internal Audit proactively monitors and reports on managements implementation of the agreed upon action plans
V.Internal Control Expert
Internal Audit is an active and valued advisor to the business regarding internal control knowledge
VI.Best Practice Sharing
Internal Audit actively provides company staff with proven and actionable best practice recommendations
VII.Training Ground
Internal Audit serves as a key source for training high performing employees and future leadership talent
VIII.External Audit Partnering
Internal Audit effectively partners with External Audit on an ongoing and coordinated basis to eliminate duplication
of effort
IX.Independence
Internal Audit is an independent and objective body within the organization that is free from interference

From the AUDIT DIRECTOR ROUNDTABLE

of the FINANCE AND STRATEGY PRACTICE
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2010 The Corporate Executive Board Company.
All Rights Reserved.ADR5766310SYN

HOW CAN MY COMPANY DO THIS?

Contact the
Roundtable

Complete
Pre-Survey

Select
Participants

1 week
Contact your account
manager or the Client
Support Center at +1-866913-8102 or exbd_support_
FIN@executiveboard.com
to register your company
to participate in the survey.

Complete a short survey

allowing the Roundtable
research staff to gain a
better understanding of
your organization.

Launch
Survey

2 weeks

Select company staff to

participate in survey1
Audit Committee
Senior Management
Line Management
Internal Audit
Send list of names to
Roundtable (for tracking
purposes only; all
responses confidential)

3 weeks

Send invitation e-mail

to staff using precustomized Roundtable
template
Internal Audit staff take
~1520 minutes each to
complete survey
All other stakeholders
take ~1015 minutes each
to complete survey
All data collected online
by Roundtable

Case at a Glance
Elapsed time (survey launch to delivery of findings): 67 weeks
Average time per stakeholder: 1015 minutes
Average time per audit staff: 1520 minutes
Time investment required for internal advocate: 45 hours
1

Review
Results

3 weeks

Roundtable prepares
customized report for each
participating company that
covers the following:
What Internal Audit
activities are most
important to our
stakeholders?
Where is Internal Audit
over-/under-investing?
Where are the highest
leverage opportunities
to inflect Internal Audit
performance as seen by
stakeholders?
How do perceptions
of Internal Audit
performance vary by
geography, business
function, etc.?

Assumes 50% response rate. At least seven responses must be

received from a function for data on that function to be reported.

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2010 The Corporate Executive Board Company.
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10

CASE DIAGNOSTIC FREQUENTLY ASKED QUESTIONS

Q: How did you decide which attributes to

include in the Calibrating Stakeholder
Expectations Diagnostic (CASE) survey?

Q: Does participation in the CASE survey require

a substantial time investment?

Q: When will I get to see my companys

results?

A: CASE attributes were developed based on

the Audit Director Roundtable perspective on
key capabilities paired with insights amassed
from hundreds of conversations with finance
executives. The Roundtable also worked
closely with a group of charter advisors to
help shape the specific survey questions.

A: Members will be asked to forward the

prepared e-mail templates to desired
respondents within their organization
and send a follow-up message to drive
participation. The online survey takes
approximately 1015 minutes to complete,
and members typically allow three to four
weeks to gather survey responses across the
organization.

A: After closing the survey, we will spend

approximately three weeks analyzing your
organizations data to lift out key areas
of opportunity and misalignment within
your organization. We will then send a
customized report of findings, which
will include data cuts on performance,
importance, and opportunity. In addition, our
staff will deliver key findings and applicable
practices by phone (and in person, as
appropriate) upon completion of the
analysis.

Q: How will the Roundtable help me improve

opportunity gaps identified through CASE?

Q: Will my organizations results be kept

confidential?

A: The customized report we generate helps

members identify and prioritize performance
gaps. In addition, our extensive database of
best practices will be paired with the CASE
attributes, allowing members to quickly
identify appropriate benchmark practices and
accelerate improvement efforts.

A: Yes, we will honor the confidentiality of both

individual responses and overall company
results. We will present results from across our
membership, broken down by industry and
geography, but specific responses will never
be tied to an individual or organization.

From the AUDIT DIRECTOR ROUNDTABLE

of the FINANCE AND STRATEGY PRACTICE
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2010 The Corporate Executive Board Company.
All Rights Reserved.ADR5766310SYN

11

 2010 The Corporate Executive Board Company.

All Rights Reserved.ADR5766310SYN