An effective business process is built on a set of well-defined and clearly stated business objectives. These key objectives articulate the ideal performance results that the company expects from that process. To monitor a business process so that it stays focused on reaching the key objectives, the company chooses appropriate performance measures. Careful selection of the performance measures takes a company a long way toward improving a business process. Thus, to build and continually improve an effective business process, a company establishes:
- Key objectives to articulate the performance results the company expects from the business process
- Outcome measures to determine whether the company has reached the key objectives
- Activity measures to monitor the performance of those activities that are instrumental in reaching the key objectives.
The following table shows key objectives for conducting internal audits, the outcome measures associated with each objective and the activity measures that drive each outcome measure. A link connects each outcome measure with its corresponding formula and analysis of the formula. The list provides a starting point from which companies may select a set of five to nine measures to track. A company chooses one or two key objectives and begins measuring the corresponding outcome and activity measures to start tracking performance. As these objectives are attained, the company may change its focus to other objectives and related measures.
|Minimize financial loss due to inside fraud.
|Revenue lost to fraud.
|Total annual number of fraudulent occurrences.
|Build the IA department as an internal knowledge resource.
|Percentage of audit customers who say they are "highly satisfied" with IA.
|Percentage of audits performed by third-party providers.
|Percentage of IA budget resources devoted to orientation, work paper reviews and training.
|Minimize exposure to unexpected risk.
|Percentage of business units undergoing annual risk assessments.
|Create a highly flexible IA department.
|Percentage of total audits not scheduled in the annual audit plan.
|Minimize third-party risk.
|Percentage of business partners and suppliers that IA assesses for risk.
The following resources on KnowledgeLeader provide additional information on how to make an internal audit department a strategic partner to the entire organization: