Internal Audit in Financial Companies

Dianna Kristensen & Marie Christine Jensen

Student thesis: Master thesis


Internal audit is known globally and supported by the Institution of Internal Auditors, which is a worldwide organization, whose mission is to support the growth, knowledge, and value creation within internal audit. In Denmark, the rules about a mandatory internal audit function only applies to a financial company with 125 or more employees in the Group. A financial company below 125 employees only requires considering the need every year based on the complexity in the business. This thesis will research the value creation of the internal audit within banks in Denmark and include perspectives from carefully selected professionals with relevant experience within the subject. The purpose is to find out how the banks find internal audit as a value creative substance to the company even though it is required by law, and to compare the research to other banks, who did not choose to include an internal audit function. The first chapters of the thesis include descriptions of relevant theory including Corporate Governance in relation to internal audit, recommendations relating to Danish companies, and definition and methods about internal audit. These chapters are used as foundation for the analysis, where the general knowledge of the subject is used to support the quantitative analysis, which is built up from surveys and interviews. The analysis examines opinions from different banks relating to the value creation of internal audit from both Board of Directors from companies with and without internal audit and Internal Audit Managers based on a survey. These opinions are further supported by interviews with two selected people with great experience within the area with separate views. This analysis is followed by a discussion where both views about having an internal audit function and not having an internal audit function are discussed. The thesis shows that the internal audit in general is a value creating area in organizations in which the focus is primary on financial audit in Danish banks even though the opinions of selected respondents think that the operational audit adds more value to the internal audit function and the organization. Further, the thesis shows that there are questions raised about what and how an internal audit function can add more value to banks below 125 employees, as there might be lack of education, knowledge, and awareness of the internal audit function in general. According to this thesis several topics have appeared for further investigation, which include how to continue to add focus and value to the internal audit function. Also, trends about internal audit function have been discussed, as there are still many Danish banks who submits an audit report on the annual report together with the independent auditor, which concludes that there is a primary focus on the financial audit rather than the value adding operational audit compared to the responses in our analysis.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2021
Number of pages144
SupervisorsKim Klarskov Jeppesen