Opening Statement to the Standing Committee on Public Accounts

Internal Audit in Departments and Agencies
(Chapter 1 - November 2004 Report of the Auditor General of Canada)

7 February, 2005

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chairman, thank you for the opportunity to present the results of Chapter 1 of my November 2004 Report—Internal Audit in Departments and Agencies. I am accompanied by Doug Timmins, Assistant Auditor General and Bruce Sloan, Principal, both of whom were responsible for this audit.

I am a keen supporter of strong internal audit in government. It is a function of government that is too often overlooked and undervalued. And in the current environment, I think it's more important than ever that this function be robust and adequately resourced.

Internal auditors play a key role in providing senior government managers with the assurance they need that departmental systems and controls are working well, or if they're not, signalling the weaknesses and providing recommendations for addressing them.

Despite the injection of additional funding for internal audit in the past four years, we found the same problems that we saw a decade ago. These include a lack of support from senior management, difficulties in attracting and retaining qualified staff, and a limited number of assurance audits being conducted.

Overall, the quality of the internal audit function varied widely in the organizations that we audited. The audit assessed the extent to which six internal audit groups had met professional standards and complied with the Treasury Board Policy on Internal Audit. The audit concluded that this varied across government: two internal audit groups (Public Works and Government Services Canada and the Royal Canadian Mounted Police) generally complied with the standards; three groups (Foreign Affairs and International Trade, Human Resources Development Canada, and Natural Resources Canada) partially complied; and one group (the Canadian International Development Agency) did not meet many of the standards.

The chapter listed a number of factors that, if implemented, would have a positive effect on the quality of internal audit. These include

• clear support from senior management;
• audit committees that include external members, independent of management;
• a clear human resources strategy aimed at strengthening and professionalizing the function;
• an increased focus on audit rather than on management consulting; and
• a strategy to ensure internal audit coverage and capacity in small entities.

The audit also concluded that the Treasury Board Secretariat has yet to establish and fund a strategy that will allow it to meet the requirements of its policy and the expectations of the internal audit community.

In conclusion, I believe that considerable work remains to be done to achieve the objectives established by the Policy on Internal Audit.

The Comptroller General has announced a number of initiatives that are designed to strengthen internal audit. The Committee may wish to ask the Comptroller General to elaborate on these initiatives and the time frame within which these steps will be taken.

Mr. Chairman, we would be pleased to answer any questions the Committee may have.