In some organizations QHSE functions and the associated management system are seen merely as compliance requirements and not as a value add to the system. As such, budgets allocated to QHSE programs are viewed as an overhead. Since they are viewed as not directly contributing to the bottom line.
Mature organizations realize the impact QHSE programs have on a system. A conforming service or product means lesser returns, greater customer satisfaction, better employee morale, lower operating costs and better governance. The cost of not having an effective QHSE program is much higher.
However often it is left up to the QHSE program managers to justify their budgets and in some cases the program itself. In an organization I was supporting, the QC function tried to get rid of the QA program completely, citing it was redundant. Here is where having good metrics can justify the value add the QHSE and Internal Audit Functions provide.
Why “Audit Value” Is Under Scrutiny in 2026
When perceived as merely a compliance check box the internal audit can seem an expensive proposition. There are many other means of oversight within the organization including leadership ‘GEMBA’ walks, inspections, supervisor oversight and a plethora of other audits including customer audits.
Attempting to go beyond the bare minimum to merely meet a requirement, increases internal audit budgets. Justifying high overhead costs to an investor or stakeholder that is taking away from the profit margins may be challenging for leadership.
Internal audits are meant to sample the system to assess its continuing effectiveness. Note sample. Not to guarantee its effectiveness. When a regulatory audit identifies an issue that was missed by an internal auditor the board and others may question the effectiveness of such programs. They may fail to recognize that the scope and objective of the two audits may have been different.
The Shift from Compliance Audits to Performance Audits
Internal Audit functions began in the financial world in the 16th century. They expanded to focus on quality outputs during the World Wars. At the time the focus was merely on ensuring a quality output with little focus on the process. Ever since system thinkers have been trying to change the mindset about audits with little progress.
Traditional Compliance-Driven Audit Models
Traditionally, as stated above, audits were about ensuring compliance and conformity. Little importance was given to the amount of scrap, waste or rework. Customer satisfaction was the goal and many a time with impact on the efficiency of the process. During the wars it did not matter how many products were non-conforming so long as they were identified and segregated.
Audits were merely about ensuring the requirement was met. This has since changed.
Modern Performance-Driven Audit Models
Internal audits now focus on the continuing adequacy, suitability and effectiveness of the system. The goal of management systems has changed from being a reactive tool to being a proactive approach to identifying and managing risks to the system. Standards now ask organizations to assess the context of operations, risks to meeting objectives and action taken to ensure that the objective can be met.
Audits thus use a risk based approach to this planning to ensure that the the system is performing as expected and will continue to do so.
Defining “Value” in an Internal Audit Context
So what is meant by a value-added audit? It is one that uses a risk based approach to sample the controls and resources in the system. Based on this sample, the auditor is assessing the effectiveness of the system (think people, processes and their interaction) to manage risks.
Auditors accept that non-conformities and new risks may arise. They assess if the system will catch it timely and address it to ensure that the possibility of it impacting the system now and in the future is minimal.
Value is added by assessing process efficiency in meeting process and system objectives. In eliminating process waste. Finally audit outputs must provide insights to leadership on the state of the system. How is my system working? What are the risks? Where is it robust and where is it fragile?
KPI Categories for Internal Audit Functions
Effective internal audit KPIs should reflect more than activity counts, grouping measures into categories that show how audits manage risk, improve processes, support compliance, and contribute to business performance.
Risk Management KPIs
Risk management KPIs evaluate how well internal audits identify, assess, and help reduce significant organizational risks before they escalate into issues.
Example: Cost of impact of high-risk audit findings if not timely identified.
Process Effectiveness KPIs
These KPIs focus on whether audit activities lead to measurable improvements in process performance, consistency, and control effectiveness over time.
Example: Reduction in repeat findings for the same process across successive audits.
Compliance Stability KPIs
Compliance stability KPIs track trends in regulatory findings and external audit results to indicate whether controls are becoming more reliable and sustainable, not just temporarily fixed.
Example: Year-over-year decrease in major nonconformities raised during external audits.
Business Impact KPIs
Business impact KPIs translate audit outcomes into tangible value, such as cost avoidance, downtime reduction, or improved decision-making, helping leadership see audits as a business enabler rather than a compliance exercise.
Example: Estimated cost savings from audit-driven corrective actions that prevent production delays or rework.
Linking Audit KPIs to Management System Performance
Organizations may find it challenging to find appropriate KPIs since you may not know the exact cost of the non-conformity unless it occurs. A general approximation can be made with assumptions outlined.
ISO 9001 – Quality Performance Indicators
Audit KPIs under ISO 9001 should demonstrate how audits contribute to consistent product and service quality, process control, and customer satisfaction.
Example: Reduction in customer complaints linked to corrective actions arising from internal audit findings.
ISO 14001 – Environmental Performance Indicators
For ISO 14001, audit KPIs should reflect how effectively audits identify environmental risks, compliance gaps, and opportunities to reduce environmental impact.
Example: Decrease in environmental incidents or permit deviations following audit-driven improvements.
ISO 45001 – Safety Performance Indicators
ISO 45001 audit KPIs should show how audits support hazard identification, risk reduction, and safer working conditions.
Example: Reduction in near-miss recurrence after audit findings addressing unsafe conditions or behaviors.
Why Most Audit Functions Fail to Demonstrate Value
As with all other processes, the internal audit function too should have a process objective that can be made measurable and should be based on the framework set in the policy. Read clause 6.2 read in conjunction with clause 5.2 of the ISO management system standards.
Often this KPI is merely the performance on an annual audit. Not even the outcome of the audit. Just that the audit was completed. This is because the audit is merely seen as an annual ritual that must be completed.
Without effective KPIs the value of the internal audit function cannot be highlighted to leadership and they cannot perceive the cost savings or rather the low investment costs for the high returns!
Building KPI-Driven Audit Programs – A System Approach
Defining Audit Objectives
Organizations must outline what it is that they want the audit program to achieve. Think beyond just compliance. An example of this may be “To provide timely insight to leadership on system risks and opportunities”
Mapping Processes
Based on this objective, now map the audit program to the processes within the system based on contextual issues impacting the system (example high turnover, supply chain issues, etc.). Use this as a basis to develop a risk based approach to performing internal audits. This would include the frequency of audits (some processes would get audited more than once a year based on risk), the selection of the audit team, the sample size and the duration of the audit.
Selecting Meaningful Indicators
With the audit objective achieved the program manager can now begin to select meaningful indicators of how the audit program has added value to the system. How it goes beyond checking for compliance and now identifies risk proactively
The Role of Auditor Competence in Measuring Value
As stated in the paragraph above the selection of the audit team is a critical step in the internal audit function. The organization must consider the competence of the auditor and select them based on the criteria outlined in ISO 19011. The auditor must then be assessed at some interval to determine their continuing competence.
Auditors must be impartial and objective and use a processes based approach to auditing. They must have the ability to perform analytical thinking, keeping their biases and prejudices at bay. Further the auditor must have the ability to frame good audit questions that seek to dive deeper and get a true picture of the functioning of the system.
How QMII Trains Auditors to Deliver Measurable Value
QMII’s auditor training focuses on developing professionals who can evaluate system effectiveness, identify real risk, and communicate insights that drive meaningful management action.
Process effectiveness auditing – Auditors are trained to assess how processes actually perform in practice, not just whether procedures exist, using evidence that links controls to outcomes.
Risk-based audit training – QMII emphasizes risk-based thinking so auditors prioritize what matters most to the organization, aligning audit focus with strategic, operational, and compliance risks.
Real-world audit case analysis – QMII training includes real audit scenarios and failures, helping auditors recognize systemic issues, weak signals, and unintended consequences that checklists often miss.
Executive-level reporting skills – Auditors learn how to translate audit findings into clear, focused insights that leadership can act on, rather than just a completed check-off list.
2026 and Beyond – The End of “Tick-Box” Auditing
Internal auditing can no longer survive as a compliance ritual measured by audit completion alone. As this article shows, audit functions that fail to quantify risk reduction, process effectiveness, compliance stability, and business impact will continue to be viewed as overhead, despite the very real cost of unmanaged risk, waste, incidents, and poor governance.
The future belongs to performance-driven, risk-based audits that provide leadership with clear insight into how well the management system is working, where it is fragile, and where it creates value. When supported by meaningful KPIs, competent auditors, and systems-aware training, internal audits move decisively beyond tick-box conformity and become a strategic tool for resilience, improvement, and sustained organizational performance.
