I wanted to call attention to an item that might have been a little lost in a recent report by the Institute of Internal Auditors Research Foundation. While the major findings of the report—that many internal auditors say they have faced pressure to alter audit findings—was well reported, one survey result was not: that companies in North America lag well behind their international peers when it comes to having the audit committee, rather than the CEO, evaluate the performance of the chief audit executive.

According to the CBOK report, Ethics and Pressure: Balancing the Internal Audit Profession, just 38 percent of North American chief audit executive respondents said they were evaluated by the audit committee, board, or supervisory committee, compared to 61 percent who said their performance was evaluated by the CEO, president, or other senior executive. Those figures are well below the global average of about 50/50, and the lowest of any region.

Some watchdog groups recommend that the performance of the CAE should be evaluated by the audit committee to maintain the objectively and independence of internal audit. "The CAE's unique role in the organization requires independence and objectivity while also demonstrating an ability to partner within the organization to add value to its operations. Independence and objectivity are fundamental to the CAE's role because the individual must be willing to raise difficult issues with senior management and the board even if that proves unpopular," the IIA wrote in a report on CAE performance evaluation.

CAE Evaluation Chart

The East Asia & Pacific region was the only other region where the performance evaluation of the CAE was more often conducted by the CEO or management (54 percent) rather than the audit committee (45 percent). The region with the highest percentage of CAE performance evaluation being conducted by the audit committee was the Middle East & North Africa at 61 percent, followed by Europe at 55 percent.

Board Oversight
Just because the CEO is conducting the primary performance evaluation of the CAE doesn't mean that the board isn't weighing in as well, notes the report's author, Larry Rittenberg. "Often however, these evaluations are reviewed by an audit committee," he writes. "Among more developed such as Europe, a higher percentage of CAE performance evaluations are made by the audit committee, board, or supervisory committee. It would appear that organizations in areas of the world where organizations typically have active supervisory committees, often rely on those committees to evaluate internal audit performance."

It also does not appear that a higher rate of companies where the CEO conducts the CAE performance review necessarily correlates with higher rate of CAEs feeling pressure to alter audit findings. Internal auditors in North America were actually just as likely to say they have been pressured to alter audit findings (25 percent) than their peers in regions where performance reviews where more often conducted by the audit committee or board. About 26 percent on internal auditors in Europe reported pressure to alter findings, and 25 percent in the Middle East & North Africa said they had been pressured.