The Internal Audit Value Chain (IAVC) Overview

It’s been well established that internal audit must seek to add value if it is to prove its worth in the organization.  The current emphasis for internal audit is all about creating value. That is not enough. The Internal Audit Value Chain (IAVC) provides a simple, flexible, and agile framework internal audit teams can use to support management across various business functions, industries, and sectors to accomplish the following:

  • Create value – this is the starting point providing an overarching objective for the organization.
  • Capture value – what problems is the organization solving, and how is that reflected in the strategy?
  • Sustain value – what factors can impact the organization’s ability to create and capture value in a sustainable manner?

In the first article in this series, “Many Internal Audit Failures Stem from Misalignment with the Company Strategy,” we defined the IAVC and its key components. The IAVC includes “the enterprise-wide initiatives impacting business functions, involving a combination of people, processes, technology, and corporate culture to drive the achievement of strategic goals and sustain profitability.”

Internal audit’s role in the value chain requires an understanding of the organization’s: 

  • Strategic direction and alignment – strategic misalignments complicates the process of achieving enterprise objectives.   
  • Risk management and monitoring – a roadmap to navigate the volatile and complex risk environment. 
  • Operational efficiencies – assist management to “capture and sustain value” by pursuing efficiencies.
  • Quality and compliance – is quality and compliance baked into the culture of your organization?
  • Financial management and governance – reorganize to be in a perpetual state of change management.
  • Responsiveness – create, capture, and sustain value while adapting to the changing business environment.

Note:  Identifying, prioritizing, and mitigating risks (including emerging risks and threats, and the pace of rapidly evolving risks) belongs to the risk owner—management.  In the process of adding value by helping management solve problems, they recognize as vital; internal audit can provide support without compromising its independence. 

Most organizations implemented changes to respond to the unprecedented COVID-19 challenges. The future remains uncertain. COVID-19, without a doubt, has tested the very premises on how every organization, including internal audit, creates value.  The IAVC provides a valuable and agile framework you can adapt to help your management teams efficiently achieve goals and objectives.  The IAVC methodology can also be modified to manage your Change Integration Process (CIP) that can be integrated with other Continuous Process Improvement (CPI) methods to develop a culture of problem solvers.

Ultimately, the priorities vary between organizations.  The six components of the IAVC should be continuously evaluated and updated to create value, capture value, and sustain value in the context of your organization’s strategic goals.

This series includes updated versions of articles originally published in the Institute of Internal Auditors (IIA) Magazine, The Journal of Government Financial Management (AGA), and Internal Audit 360°, an independent knowledge source for internal auditors of all levels.  Content will be updated and added here as they become available.

For more information on the Internal Audit Value Chain (IAVC), contact:

Jonathan Ngah, CISA, CIA, CFE, CGFM.
Jonathan is a principal at Synergy Integration Advisors, a professional services firm providing internal audit outsourcing and internal audit co-sourcing services to government institutions, private-sector, and not-for-profit organizations in the US and the Asia Pacific (APAC) regions.

Many Internal Audit Failures Stem from Misalignment with the Company Strategy

This is Part I – Strategic Direction and Alignment of a revised six-part series on the internal audit value chain (IAVC). Misalignments between enterprise strategy and business unit priorities must be identified and resolved as soon as possible to avoid long-term financial losses, reputational damage, and improve responsiveness to the changing business environment.  Initial publication – May […]

Eight Steps Internal Audit Should Take to Aid Risk Management

This is Part II – Risk Management and Monitoring of a revised six-part series on the internal audit value chain (IAVC). “According to the IIA, Internal audit can serve as a disruptor, relentlessly challenging the status quo and identifying and focusing on emerging risks, while factoring the rapid pace of evolving risks.”  Initial publication – June 27, […]

How Internal Audit Can Add Value by Pursuing Efficiencies

This is Part III – Operational Efficiencies of a revised six-part series on the internal audit value chain (IAVC). Management should empower business unit leaders and internal audit teams to continuously challenge the status quo, starting with mission-critical activities to drive operational efficiencies. Initial publication – September 23, 2018. Updated – May 15, 2020. here are few […]

How Internal Audit Can Add Value by Boosting Quality and Compliance

This is Part IV – Quality and Compliance of a revised six-part series on the internal audit value chain (IAVC). The emphasis on product and service quality is even more critical as organizations across the globe scrambled to respond to the unprecedented disruptions from COVID-19.  “Quality is Everyone’s Responsibility.” Initial publication – January 15, 2019. Updated – May […]

How Internal Audit Can Add Value by Improving Financial Management and Governance

This is Part V – Financial Management & Governance of a revised six-part series on the internal audit value chain (IAVC). How can internal audit assist management and stakeholders throughout the organization to continuously improve accounting, financial reporting, audit, and governance initiatives? Initial publication – May 14, 2019. Updated – May 15, 2020. ne of the biggest […]

How can internal audit create and sustain value by helping management improve responsiveness to the changing business environment?

This is Part VI – Responsiveness to the changing Environment of a revised six-part series on the internal audit value chain (IAVC). Responsiveness and adaptability require agility, excellent communication, and collaboration between the modern internal audit department and functional managers.  How well an organization anticipates and reacts to the changing business environment is critical towards success. e […]

Other IAVC Blog Posts

The Lost Year 2020: Focusing on the fundamentals for solutions DURING and POST-COVID-19.

How do you plan for a smooth re-opening and manage increased uncertainty?   First, as the world continues to struggle and cope with the effects of COVID-19, we hope you and your team are doing well. With the increased possibility of a second wave, precautions to help protect the health and wellbeing of your staff, clients/customers, […]

Going back to fundamentals. Why re-evaluate your Current and Post-COVID-19 Strategy?

Why must you re-visit your business fundamentals now? “You go back to fundamentals when things start to go awry.” Bill Cowher       We have all seen our favorite athletes, entertainers, leaders, and teachers encounter and overcome challenges. In difficult times, they often turn to the fundamentals.  Your strategic plan is formulated on core business principles—or fundamentals.  […]

Improve risk management and sustain strategy execution by focusing on reviews that matter

What type of reviews should your teams be performing during and post-COVID-19? COVID-19 has created new realities and unprecedented challenges.  It has also impacted your stakeholders and control environment and how audits and reviews are performed.  The rapid pace of change accelerated the need for the following: new solutions to your customer’s problems (adapt to […]