The Research On Performance Measurement For Internal Audit Function Based On Balanced Scorecard

In the worldwide trend to improve intra-corporation governance, internal audit has increasingly had many challenges and opportunities as well. Thus, more and more attention, theoretically and practically, has been obtained to the importance of internal audit. It could be a crucial way to resolve problems in risk management, internal controls, and governance procedures. Furthermore, internal audit would accumulate value of by increments through improving the efficiency of execution. Can internal audit department and staff take their responsibilities effectively under this high expectations and pressures? How to evaluate their achievements? These two instant questions have to be answered. Based on the previous relevant theories and researches, this paper systematically studies on the method to evaluate the internal audit department performance.First of all, this paper reviews the definition and history of internal audit. The function of internal auditing in the modern enterprise system is not only to do troubleshooting but, more importantly, to obtain value-adding and improve operation mode for the enterprises. An ideal internal audit organizational structure is to establish an independent audit committee of the Board (Chapter 2). This is also the cornerstone to study on performance evaluation of the internal audit department. In Chapter 3, some affection factors, such as the object of internal audit, skills, and evaluation standards, are investigated on the value increment, the variability of clients and their requirements, the GAIN evaluation, the expansion of internal audit field.Then, the Balanced Scorecard (BSC) framework is introduced in detail, including the principles of strategy-focused organization, the strategic maps, return-driven strategy theory. Other strategic performance evaluation models are also described in order to show the comparative advantages of the Balanced Scorecard (Chapter 4). This chapter finally expounds the adaptability of the internal audit performance evaluation with BSC.Finally, Chapter 5 focuses on how to use the balanced scorecard framework for the internal audit department to evaluate the performance of departments and adapt to the overall organizations' strategic objectives. It sums up the procedure to establish the BSC framework for the internal audit department as below: strategic assessment and refinement, the strategy mapping, identification of performance measures, refinement of Balanced Scorecard. In conclusion, by completely analyzing the characteristics of the internal audit department performance measurement from four dimensions of the Board (audit committee); management (auditees); the internal audit process; and the innovation and capabilities, a corresponding index was proposed. The application and measure method of this key index in each dimension were discussed as well.