The State of Internal Audit Education
Internal auditing should be an attractive career choice for students, with a midpoint entry-level salary of $73,500, according to Menlo Park, Calif.-based staffing firm Robert Half International Inc. But all potential internal auditors need an introduction to the profession and a way to gain the knowledge and skills they will need to pursue their careers.
Young internal audit talent, by definition, are individuals with little or no internal audit or other work experience, whose main source of knowledge is the education received from colleges and universities. However, most universities don’t offer dedicated, comprehensive internal audit education. Instead, internal auditing typically receives cursory coverage as a component of a more generalized audit class or is omitted from the curriculum altogether.
To foster dedicated internal audit education, The IIA created the Internal Audit Education Partnership (IAEP), which works with universities to deliver high-quality, internal audit-focused education to future professionals. Curriculum for these programs includes multiple courses covering the skills required for internal audit success, internship opportunities, case studies, coordination with and participation in local IIA chapters, and promotion of certifications such as the Certified Internal Auditor designation.
Currently, 56 universities worldwide have enrolled in the IAEP program. Of those universities, 12 are classified as Centers for Internal Audit Excellence, a label given to institutions with the most rigorous internal audit curriculum. There are 22 comprehensive universities (middle tier), and 22 foundation-level universities (entry-level tier). In addition, The IIA’s Internal Audit Awareness Program (IAAP) includes 58 universities that offer courses in internal auditing or operational auditing.
These universities are a rich source of internal audit talent, as evidenced in “The Impact of Domain-Specific Internal Audit Education on Financial Reporting Quality and External Audit Efficiency,” a research paper forthcoming in Accounting Horizons. The research shows there are measurable benefits for organizations that hire graduates who have completed internal audit-focused college courses, including higher quality internal controls and greater efficiency in completing external audits in which the work of internal auditors is relied upon.
An Education Gap
Although the number of IAEP universities is at an all-time high, they represent less than 3% of the 2,165 universities listed in U.S. News and World Report’s 2022-2023 Best Global Universities Rankings. In addition, the current IAEP program was launched more than 15 years ago, suggesting that university buy-in has been slow.
With 39 of the IAEP programs located in the U.S., most of the world lacks access to dedicated internal audit education. Moreover, seven of the 12 Centers for Internal Audit Excellence are in the U.S., with five clustered in the southeastern part of the country. This leaves most of the U.S. underserved by the highest echelon of internal audit education.
Fostering the Future
In the October 2022 issue of Internal Auditor, IIA President and CEO Anthony Pugliese noted that The IIA “has already begun implementing a new student strategy that will help us build a robust pipeline of the best and brightest talent to meet the ever-expanding needs of business.” Part of that strategy is making IIA student membership free for full- and part-time students in the U.S., Canada, and the Caribbean, which took effect in August 2022. Additionally, The Institute is building a global student membership model, with 35 international affiliates currently opting to provide free membership to students.
Building a broader pipeline relies not only on the actions and support of The IIA, but also of educators and practitioners. To accomplish this objective, the profession must overcome three obstacles to educating future internal audit talent.
Reluctance. Universities, and more specifically, their accounting programs, may be hesitant to devote curriculum to internal auditing for a variety of reasons, including:
- Lack of faculty with the appropriate skills to teach the curriculum.
- Lack of incentive for faculty to focus on internal auditing because work in the field doesn’t contribute to a positive tenure decision.
- Excess demand from traditional recruitment routes such as external auditing and tax accounting.
- Lack of flexibility in course choices.
- Lack of awareness of internal auditing’s distinct role compared to external auditing.
Some of this reluctance, such as lack of awareness, may be overcome with better communication and marketing of the profession, which The IIA could spearhead. However, addressing some of these factors will require collaborative institutional change. For example, to increase the number of faculty qualified to teach internal audit requires active practitioners to teach part-time, former practitioners to teach upon retirement, or practitioners to leave the profession to pursue academia full-time. In all circumstances, action from current or former practitioners, along with a desire and financial motivation to teach, is crucial.
Return on Investment. Curriculum offerings at universities require investment of financial and human resources. Universities can only sustain specialized curriculum if those courses yield a return on investment, which requires consistent student enrollment. However, students have no incentive to devote their academics to an internal audit curriculum if it doesn’t contribute to available job opportunities.
While large, in-house internal audit departments can offer such opportunities, these departments are the exception, not the norm, according to Internal Audit: A Global View. Seventy-one percent of internal audit departments have 10 or fewer full-time employees, limiting the number of job opportunities available for recent graduates. Internal audit cosourcing and outsourcing providers, such as large, global accounting firms, could expand those opportunities, but they often are focused on acquiring experienced talent to meet their clients’ expertise expectations.
This creates a chicken-and-egg scenario for preparing the next generation of internal audit talent, with two options:
- Universities must risk operating dedicated internal audit education at a loss until the profession acknowledges the benefit of recruiting graduates into entry-level positions.
- Firms must be willing to hire more students directly out of college to fill internal audit roles to spur the creation of curriculum.
The IIA could play a mediating role in this process, communicating the potential benefits to be reaped by both universities and large audit firms if they could reach common ground.
Global Expansion. The geographic distribution of IAEP universities is not wide enough. With the aim of expanding the program, The IIA should explore why some universities participate while others don’t. One encouraging sign is that most IAAP schools are located outside North America.
It also should investigate why some universities stagnate at lower tiers of the IAEP program rather than advancing to the more rigorous Center for Internal Audit Excellence status. The Institute could leverage this information to better market, and more rapidly expand, the program into currently untapped markets. Expansion could make IAEP more visible to students and promote the profession as a more desirable career choice.
A Joint Effort
These three obstacles are just a handful of the critical challenges that the profession must overcome to foster the next generation of internal audit talent. It is clear that these challenges are too great for any one person, group, or organization to successfully resolve alone. The IIA, educators, and practitioners will each have to do their part — both individually and collaboratively — to open the pipeline for high-performing students, deliver dedicated internal audit education, and increase the availability of entry-level internal audit positions.
It could take years for such a pipeline to flow freely, and even longer for its benefits to become measurable. However, the success of such efforts could cultivate a younger generation of practitioners who would continuously replenish the internal audit talent pool for years to come.