Audit Release: Opportunities Exist to Increase the Impact of State Agency Internal Audit Functions

Report Highlights

When internal audit functions are properly structured and resourced, they are a valuable asset for mitigating risks and improving agency performance and accountability. However, internal auditing has not been a priority in Oregon. Although the Department of Administrative Services (DAS) has the authority to create policy and a legal requirement to support audit functions, the agency has not strategically promoted the role of internal audit functions due to a number of factors. DAS has not effectively monitored, coordinated, or reported on internal audit function impacts, challenges, and resource needs to state legislators and other stakeholders.


Internal audit functions help organizations achieve their objectives and improve performance. The Oregon Legislature determined internal audit activities within state government should be coordinated to promote effectiveness, and directed DAS to adopt rules and set standards to ensure the integrity of internal auditing.


The purpose of this audit was to determine the steps DAS should take to more effectively coordinate state internal audit functions, and what actions can be taken to increase the impact of these critical functions.

Key Findings

  1. The effectiveness of an agency’s internal audit function is defined by the tone at the top. In general, the internal audit function at state agencies in Oregon is not prioritized or well understood by agency management and the Legislature. Many current challenges and deficiencies have persisted for more than two decades.
  2. Internal audit independence and impact is directly influenced by the effectiveness of the audit committee and the committee’s relationship with agency leadership. Internal audit functions in some state agencies do not follow important elements of professional audit standards that ensure independence from management. These deficiencies reduce the effectiveness of the functions and leave agencies more vulnerable to fraud, wasted taxpayer dollars, and other substantial risks.
  3. Poor guidance and a lack of strategic management and effective coordination from DAS has contributed to internal audit challenges at state agencies. DAS reporting on statewide internal audit activities and impact could be a valuable tool for both internal auditors and policymakers, but DAS reports are often inaccurate, confusing, and uninformative.
  4. Many internal audit functions are staffed by well-trained, qualified professionals who make contributions to the agencies they serve despite governance and resource challenges. With additional emphasis and resources they could increase their value and return on investment potential.


We include 16 recommendations to DAS intended to enhance the value and impact of state agency internal audit functions. DAS agreed with 13 of 16 recommendations. The agency declined to say whether it agreed or disagreed with three recommendations.


Read full report here.

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Internal Auditor RePost: Toxic leaders, toxic culture

O’Connor often flashes back to his time as a loss-prevention officer at Tiffany & Co.’s in New York City, a busy store containing immensely valuable items. Each day, tourists would come into the store to marvel at the magnificent jewelry. “It was an amazing experience to stand and monitor the crowd: hundreds of people, all basically following the pattern of a shopper — except for the three or four people who are not, the toxic outliers,” he recalls. “It’s the same for managers in an organization. There are going to be those outliers. With our unique experience, internal auditors can help keep the honest people honest as well as identify the truly toxic leaders before they cause too much damage.”

Read more here if you are an IIA subscriber (it is behind a paywall, unfortunately) about how internal auditors can create positive change in the face of toxic forms of leadership, and how that change can cause a ripple effect that improves not only leadership, but the culture of an organization.

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