Over the last 20 years of my experience as an internal auditor, I found that the internal auditing profession has not been without issues and challenges unlike other professions in the civil service. Some of the pertinent issues and challenges unique to this profession that needs to be closely scrutinized are briefly highlighted for improving the effectiveness of internal audit services in the public sector as a whole. While the internal audit functions in public corporations are well structured where such issues and challenges are minimal, internal audit functions in government agencies continue to embrace them even today.

Independence and objectivity

By definition, Internal Auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate the effectiveness of risk management, control, and governance processes.

The independence and objectivity is one of key requirements to be fulfilled under the international professional practice framework standards of internal auditing. Internal auditors are required to report functionally to the board and administratively to the CEO of the organization. In government agencies, there is no board to oversee and evaluate the performance of internal auditors and hence internal auditors report both functionally and administratively to the head of agency which ultimately impairs its objectivity for fear of repercussions on any actions.

This has been one of the major policy issues and challenges being faced until now due to lack of clear policies. However, such an issue and challenge can be overcome by proper structural positioning in the organization and instituting a dual reporting system for internal audit function in the government agencies through change in policies to improve the effectiveness of internal audit.

Perceptions and realities

People often ask if an internal audit is necessary? What is the role of internal auditor? Are audit memos reduced? There are varied perceptions about internal audit due to lack of education and understanding. If we ask any individual in the client organization whether there is a need for an internal audit, nobody knows why there is a need. Some even perceive it as an internal control function. Such misperceptions and expectations of stakeholders often results in de-motivation of internal auditors in the public sector.

The relevance, lack of trust and recognition of internal audit in government agencies have been another pertinent issue and challenge. The roles of internal auditors are perhaps misperceived by many of stakeholders which have been one of greatest challenges for Internal Audit to function effectively in the public sector. Internal Auditing can provide only a reasonable assurance based on the risk assessment on compliance and operations through its periodic reporting system in achieving the objectives of the organization.

Differentiating internal control and internal auditing will make the role of internal auditor clearer. Internal control is a process, policy and procedure designed by management to ensure reliable financial reporting and the preparation of financial reports under the applicable accounting framework. The four main objectives of an organization’s internal control system are: (1) safeguard organisational assets (a) ensure the accuracy and reliability of organisational accounting records and information (2)  improve the efficiency of the organization’s operations (3) measuring compliance with policies and procedures established by management. Implementing an effective internal control system will prevent fraud and corruption in the organization’s operational management. Internal auditing is only a diagnostic and reporting function to provide assurance and consulting services related to the internal controls and add value to improve the organization’s operations.

An early warning system in the organization is necessary to mitigate risks and prevent unwanted things from happening. Therefore, internal auditing is an important function considered as the third line of defense in the management of organization and a valuable tool for evaluation of the effectiveness of risk management, control, and governance processes in an organization. It helps the organization in accomplishing its goals by providing independent objective assurance and consulting services designed to add value and improve an organization’s operations. The continuous monitoring and reviewing of business processes by internal auditing will improve the efficiency and effectiveness of these processes through control recommendations for improvement of processes. This makes organization depend on process rather than people. It serves as an early warning system to alert the management in the organization before things go wrong.

Standards and professional practices

Although there are adequate guidelines issued for proper operations of internal audit services like Charter, Code of Ethics, Manual, and localized standards framed for professional practice, emerging issues and challenges are very much prevalent in internal audit. The first external quality assessment report of Internal Audit Services in Bhutan conducted in 2019 by international consultant from Institute of Internal Auditors (IIA) in Malaysia revealed that the Internal Audit Services of the public sector still has not achieved some of the international performance standards but it has tremendous potential to cross level 3 of the international competency model where level 5 being the highest. The report revealed that the service lacked use of analytical tools by most of the Internal Auditors which needs to be addressed at an early stage to advance crossing level three of the international capability model. The report also recommends the institution of an audit committee and quality assurance and improvement programs for internal audit services.

In the 21st century, internal auditors are required to be more oriented towards providing satisfaction to the management as customers (customer satisfaction). Internal auditors can no longer act as watchdogs but as business partners in the organization. The new paradigm shift suggest that internal auditors must be able to add the focus of their work to: (1) From Hard Control to Soft Control (2) From Control to Risk (3) From Knowledge Audit to Business Knowledge (4) From Independence to Value.  In carrying out the role by using a new paradigm, internal auditors must try to implement that role to strengthen the oversight process of the organization’s internal control system.

Competency and career path 

The professional competency lies in knowledge, skills and experience in the profession itself. Additional competencies like certification, training and mentoring programs can also help in building the capacity. However, there are no courses or programs offered within the country to enhance the capacity of the internal audit profession. Moreover, the future career progression in this profession lies on the demand of client agencies for internal audit services. Similarly the performance of internal auditors in the public sector also accounts for their competencies in service delivery according to the needs of client agencies. Had there been regular courses or programs offered in the internal audit profession like in accounts, procurement, IT etc. the issue of competency and career progression would not arise and performance would become effective.

Recruitments and retention

Fresh recruitments into the internal audit service without any knowledge about the profession have been one of the greatest challenges both for the client agencies as well as incumbent internal auditors. So far, fresh recruits receive only orientation trainings from their seniors. Where there is no senior internal auditor, example in dzongkhags, neither the internal auditor can perform their job responsibility nor the client agency makes use of the service. Majority of the internal auditors with knowledge and experience have left the service either on pretext of studies or seeking transfers elsewhere. Lack of interest, hostile work environment, and limited numbers of recruitment are some of the reasons for not meeting the approved manpower strength in internal audit service. The high attrition rate in internal audit service is attributable to the above issues and challenges.


Although various initiatives have taken place in improving the quality and effectiveness of internal audit services in the public sector, the above issues and challenges still continue to remain. Therefore, I feel that although internal auditing is an essential early warning system in the organization, it’s a challenging profession to sail smoothly unlike other professions in the civil service in Bhutan.  In fact, there is a need to shift the internal auditing philosophy marked by a change in structural orientation and the role of the internal auditing profession for its relevance with better trust and recognition by its clients to improve the effectiveness.


Contributed by

Padam S Ghising