Internal Audit in Practice: Best Practices and Case Studies

This article explores the best practices and case studies of internal audit in practice. It covers the auditing practices of leading companies and how to implement them effectively. The article also includes a case study of DP World and its auditing practices.

Running head: INTERNAL AUDIT IN PRACTICE
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Table of Contents
Brief Summary of the Cases and Companies:............................................................................2
Summary of the Best Practices:.................................................................................................6
Analyses and discussion:............................................................................................................7
DP World...................................................................................................................................8
Suitable Auditing practices of the company:.............................................................................8
Plan for implementation of best practices:.................................................................................9
References:...............................................................................................................................10

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Brief Summary of the Cases and Companies:
 Applying Audit Practices: British Telecom is United Kingdom’s main
communications services company, with yearly revenue of £ 20 bn. It has a workforce
of around 90,000 and operates in more than 170 countries. Its new director of internal
audit Mr James Grigor has ensured that each of its six lines of business has its own set
of internal audit team (Home.bt.com, 2018). Grigor has made a string of changes in
the internal audit practices. The internal audit’s work plan is planned on a yearly basis
and is subjected to quarterly review. BT has increased its focus on the training and
development of the internal audit teams, focusing on adequate training and
professional qualifications. Grigor has also ensured that the company’s internal audit
teams, provide assurance services and has tried to make it the audit team’s focal point.
 Scope of Internal Audit:
Met Office: Met office is the United Kingdom’s national weather service. It is an executive
agency of the Dept. Of Business, Energy and Industrial Strategy, headed by Nick Jobling and
Scientist, Prof. Stephen Belcher. It is primarily engaged with the duty of reporting weather
for castings and warnings. Jonathan Kidd is the head of the internal audit of Met Office (Met
Office, 2018). The internal audit function in Met office is divided into three main Auditors
and three junior auditors. This procedure follows a risk based approach towards audit
functions. It also conducts fraud investigations and also provides consultancy services. It
looks to the risks, with the corporate objectives and proposes audit on the ABC model from
high to lower risks. Most importantly, the role and the jurisdiction of the internal audit’ work
have been agreed upon by the Audit committee, with a room for flexibility. It is also ensured

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that the internal audit’s work is in alignment with the management’s views on risk (Louwers
et al., 2015).
Travis Perkins: It is a Financial Times Stock Exchange registered company and is the
primary supplier towards the building and construction market of the United Kingdom. It has
a turnover of £4.8bn and it operates with over 2000 branches. Mr David Finch, its director of
the company’s business risk and assurance wing, says that the scope of the internal audit has
been laid out in the company charter. This has been agreed and ratified by the audit
committee (Travisperkins.co.uk, 2018). According to Mr Finch, if the internal audit is to be
independent, in such cases, it becomes beneficial in setting up the charter and its terms, in
order to avoid going back for any help in case of contingencies.
InterContinental Hotel Groups (IHG): IHG has the reputation of being regarded as one of
the biggest hotel chains worldwide. It has over 4500managed or franchise hotels, in over a
100 countries. According to Bruce Vincent’ International head of internal audit of (IHG), it
has 28 internal auditors globally and it has globalised this from its original regional shape
after 2008, for the purpose of centralising the efforts and judicious use of resources.
Moreover, it has led to more transparency and less duplication of work. IHG applies a
combined assurance model and risk based internal audit approach, which assists in
determining the scope of the internal audit. This helps in prioritising over other areas, where
risk assessment is more important.
 Auditing projects:
Development for Work and Pension (DWP): It is the organisation which is primarily
responsible for carrying out the pension and other benefits to the general people. Mark
Ripley, its head of internal auditing ensures that his team of internal audit understands,
the work which is being done, it is also ensured that the teams are adequately experienced

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in handling such cases, ensures the application of self-assurance and even uses an
integrated assurance framework and conducts intermittent appraisals throughout the life
cycle of the project (Gov.uk, 2018).
SABMiller: It is the largest beverages company in the Financial Times Stock Exchange
100 index and is the 2nd biggest brewer in the world, with an income of US $28 bn (Ab-
inbev.com, 2018). According to Steve Humphries, internal audit needs to engage actively
with the senior stakeholders of the company as their support is crucial, the audit
functioning can act in tandem with the required procedures and transparency. It is an
important activity for an internal audit is to form a map of other assurance providers, for
avoiding duplication of work and plugging the holes. Health checks are also a vital part in
ensuring the interest of the stakeholders.
Transport for London (TfL): It is an efficient and the primary body of Greater London
Authority, which is entrusted with the task of for the capital’s transportation plans. It
looks after every nook and corner of the transport services across London. It is entrusted
with the task of providing assurance services. According to Clive Walker, its head of
internal audit, accepting a cohesive assurance framework delivers the board and the
senior management, with a better view of the ongoing tasks and the procedures of risk
recognition. It also upholds a general opinion of the project lifecycle for ensuring an
independent view over the project and its implementation (Nickell and Roberts, 2014). It
also uses a scoring mechanism, for assessing the critical analysis of these projects and
audits.
 The relationship with the audit committee:
Met Office: According to Mr Kidd, he has an upright and open association with the
chairmen of the audit committee. He is always available by phones and email and also

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they face no issues in organising a face to face meeting at any time. Every task, its
analysis, assessment is discussed regularly and a public transparency is also provided at
all times and an independence is also provided in the execution of duties.
 Risk based internal audit:
Électricité de France (EDF): It is Europe’s biggest electricity based company and is
the 2nd main in the world. Its UK audit head Mr Smith has executed a risk centred
internal audit as it is the best way for value addition and for providing assurance. It
reviews the senior management’s view in risk assessment, prioritising risks are done,
development of audit programmes is done and a warning system is used to notify
whether recommendations are being acted upon. It has divided its audit universe into
sub parts entrusting each of them with their own tasks and responsibilities.
Evaluating internal audit:
Travis Perkins: Every year Travis Perkins evaluates its internal auditing scenarios to
judge its efficacy. Feedback requests are issues after every audit review, scores are
also provided, the CIA is also requested to conduct an external review, benchmarking
review is also set out, review is done against the professional standards and both the
management as well as the audit committee is informed about the progress of the
review (Travisperkins.co.uk, 2018).
Ignis Asset Management: It is a part of the Phoenix Group, which is entrusted with
the job of being UK’s major life and pension consolidator. According to Miss Arleen
McGihan, its head of internal audit, her six strong teams conducts self-assessment of
all the activities of internal auditing. The teams conduct questionnaires, incorporating
input from the audit committee (Bloomberg, 2018). This helps in getting feedback

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from the key auditees on the performance of the internal audit. KPIs are also
increasingly used, for ensuring their focus on the key assurance areas.
Summary of the Best Practices:
In all the six areas of internal audit, certain best practices have been used. Some of
them have been summaries below:
1. Applying audit practices: In this case, British Telecom’s focus on improving the
overall quality of internal audit by focusing on training and development of the
auditors (Home.bt.com, 2018). This helps in keeping in track of the overall quality of
the auditing services.
2. Scope of internal audit: Here, Travis Perkin’s audit charter plays a vital role in
recognising the scope of the internal audit. The integrated assurance model helps in
gauging the scope of internal audit (Travisperkins.co.uk, 2018).
3. Auditing Projects: Usage of self assurance, integrated assurance framework and
conducting periodic reviews of the life cycle of the projects is an important auditing
practice, adopted by DWP. SABMiller’s working strategy of closely working with the
senior management is helpful in the growth and expansion of the scope and
functioning of internal audit.
4. Relationship with audit committee: Met Office’s head of internal audit’s open and
good communicative relation with the audit chair is a good practice for ensuring
maximum transparency and strength in case of internal audit (Met Office, 2018).
5. Risk based internal audit: The risk based audit approach adopted by Électricité de
France (EDF) for ensuring audit assurance and value addition is a good practice. The

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warning system adopted for providing warning regarding acting on recommendations
is again a good practice.
6. Evaluating internal audit: Providing scores regarding assessment of the internal
auditing practices, setting benchmarking and ensuring the external auditing by CIA
are some of the best practices for rightly evaluating internal auditing by Travis
Perkins. Conducting questionnaires and focusing on KPIs are some of the other
practices adopted by Ignis Asset Management.
Analyses and discussion:
There are a variety of auditing practices which have been adopted by some of the
leading companies in an around the world and those, about which have been reported here.
Some of these auditing practices are path breaking and have laid the path for the development
of the auditing practices. An analysis of these practices is also needed. British Telecom’s
focus on excessive training and development of the auditors is a welcome move, as it upholds
the quality of the auditing experts. Travis Perkins’ case of using a charter for explaining the
scope of the auditing matters is a good move, where the scope can be easily identified,
leading to less amount of confusions. Moreover, the audit assurance model is also a great
move, which helps in actually measuring the scope of the internal auditing of the company.
The practice of adopting the integrated auditing framework and the periodic analysis and
review of the life cycle of the projects is also a good move for ensuring proper auditing of the
projects. This helps in ensuring proper auditing o these projects. Met Office’s head of internal
audit’s open and significantly transparent relationship is a very welcoming prospect, as this
helps in conducting auditing operations in a more transparent manner. The warning system
adopted by the Électricité de France (EDF) is a welcoming addition in the auditing world.
This would help in providing warnings and timely interventions, when it is seen that the
auditors are not acting according to the recommendations. Ensuring maximum transparency

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by conducting an external audit by CIA, setting up of benchmarking are some of the other
good methods, which would genuinely help in improving the transparency aspect of internal
auditing.
DP World:
DP World or the Dubai Porting World, as it is commonly known as, is one of the
world’s largest container terminal operators. It has a portfolio of about 78 operating marines
and inland terminals, which is supported by over 50 connected businesses across 40 different
countries, in around six continents (DP World, 2018). It has a significance presence in both
the high growth as well as the mature markets. The company has a devoted team of round
about 36,000 workers, ranging from 103 countries, working in shipping lines, as importers,
exporters and as many other participants of the global marine supply chain. The company’s
largest and the most lucrative business is ‘Container handling’ and it produces around three
quarters of its entire revenue (DP World, 2018). In the year 2017, the company generated
revenue of about US $4.715 billion.
Suitable Auditing practices of the company:
DP World ensures that its internal audit committee helps in ensuring maximum
transparency and conduct audit in a fair and unbiased manner, which reflects the true
conditions of the company at all times. Some of the practices are as follows:
 Incessant reviewing and monitoring of the integrity of the group’s financial
statements.
 Continuous monitoring of the aptness of the company’s accounting policies and
practices.
 Reviewing the efficacy of the company’s whistle blowing policies.

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 Regularly watching and complying with the risk minimising procedures across the
company’s working arena.
Plan for implementation of best practices:
Implementation of an auditing plan is indispensable for the successful auditing of any
business. A formal structure and plan is necessary for this purpose. It is this plan, which
provides the skeletal framework, upon which the entire operation of conducting an effective
is based upon. If the audit plan is not properly drawn up and prepared, the efficacy of the
internal audit takes a major hit (Alzeban and Gwilliam, 2014). Some of the major steps,
which can be adopted for ensuring proper implementation of the internal audit, are as
follows:
 Identification of the auditing areas: Before embarking on the process of auditing, it
is essential to chalk out those areas, which genuinely needs auditing, this would help
in avoiding duplication of work and misusing of monetary funds.
 Formulation of internal audit committee with full autonomy: the formulation of
the internal audit committee comprising, some of the brightest brains of auditing is
required at the first stage (Endaya and Hanefah, 2013). It must also be ensured that
full autonomy is provided to the committee for pursuing any matters associated with
swift and impartial auditing of the company.
 Preparation of an auditing calendar: An ordered and methodical procedure to the
auditing process can help in ensuring a periodic and systematic auditing of the
company (Reding et al., 2013). Moreover, it must be ensured that the objectives and
scope of internal audit is in tandem with the management and the company’s goals
and objectives.

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 Close proximity with senior management: A successful auditing procedure would
only work, when the senior management provides its full and relentless support.
Without their support, conducting any kind of auditing would eventually become an
herculean task.
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survey of the Saudi public sector. Journal of International Accounting, Auditing and
Taxation, 23(2), pp.74-86.
DP World. (2018). DP World Marine Ports | Our Businesses. [online] Available at:
http://web.dpworld.com/our-business/ [Accessed 11 Jul. 2018].
Endaya, K.A. and Hanefah, M.M., 2013. Internal audit effectiveness: An approach
proposition to develop the theoretical framework. Research Journal of Finance and
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Gov.uk. (2018). Department for Work and Pensions - GOV.UK. [online] Available at:
https://www.gov.uk/government/organisations/department-for-work-pensions [Accessed 11
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Gupta, P. and Sharma, A.M., 2014. A study of the impact of corporate governance practices
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