Asian Journal of Management Sciences & Education Vol. 12, Jan-Dec 2023__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________EFECTIVENESS’S EVALUATION OF INTERNAL CONSULTANCYIMPLEMENTATION: CASE STUDY AT PT ABC
Neil Setiawan1, Dr. Dadan Rahadian, ST., MM2
Faculty of Economics & Business Management, Telkom University,
INDONESIA.
1neil.setiawan25@gmail.com, 2dadan.rahadian@gmail.com
ABSTRACTInternal Audit Group is one of the units at PT ABC (ABC) which was formed tosupport the company’s objectives to implement Good Corporate Governance(GCG) so that the company can continue to grow. Internal Audit activities
consists of Assurance activities with the objective testing of evidence andConsulting activities with the granting of providing alternative solutions and otherservices related to the client needs whose nature and scope have been agreed by
the client without the transfer of responsibility from management that is
independent and objective.
Related to this, the researcher conducted a study on the evaluation of effectivenessthe implementation of internal consultancy so far at ABC and examined theguidelines that could influence the effectiveness of the internal consultancy
implementation. The objectives expected in this study are to make theimplementation of internal consultancy in ABC more optimal so that one of themain objectives of the internal audit function as a Trusted Advisory can beachieved.
Based on the results of research analysis through literature studies and interviews,
it was shown that the effectiveness of internal consultancy implementation in ABC
needs to be improved for some principles and suggestions that are not yet effective
and need deeper study by applying the principles of internal consultancy
guidelines from the International Standards for The Professional Practice ofInternal Auditing.
The researcher recommends an effort to increase the effectiveness of internal
consultancy implementation at ABC again by optimally applying the principles ofinternal consultancy guidance and applying guidance suggestions in implementing
formal consultancy assignments. And internal auditors must provide
understanding to management and related parties to concepts, operating
guidelines and the need for communication in carrying out internal consulting
services.
Keywords: Commitment; Communication; Principles; Trusted Advisory

INTRODUCTION
PT. ABC (ABC) is a telecommunication company subsidiary of Indonesian States Owned
Enterprises and foreign in Indonesia. ABC as a company that is run in accordance withapplicable laws and business norms must carry out good control, risk management andcorporate governance to continue to develop in achieving its goals. ABC has an Internal
Audit (IA) unit or field that plays a role in conducting assurance and consulting activities
independently and objectively through a systematic and regular approach to evaluate andimprove the effectiveness of Governance Risk and Control (GRC) processes, to provide
value added and improve ABC performance.
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Asian Journal of Management Sciences & Education Vol. 12, Jan-Dec 2023__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________The scope of IA by carrying out internal control tests based on designs that have been
made specifically referring to the Sarbanes Oxley Act (sections 302 and 404), risk
management includes the process of determining, identifying and companywide risk
mitigation plans as well as corporate governance covering matters related withcompliances for the implementation of an activity against Government Regulations orapplicable laws, regulations issued by capital market institutions and Company Policy.
From 2010 to 2018, IA from ABC carried out audit assignments. More assurance
assignments have been carried out compared to consultancy, even though one of the futuregoals of the ABC IA unit is to become a Trusted Advisory. The internal consulting thathas been implemented by ABC at this time still has opportunities to improve its
implementation to provide added value to the company.
LITERATURE REVIEWAgency Theory
The first exploration of agency theory carried out a discussion of mentioning the manager
of a company as an "agent" who represents shareholders and shareholders as "principals"
who delegate business decision making to managers (Jensen & Mecking, 1976). The
problem that arises because of a corporate ownership system like this is that agents do notalways make decisions aimed at fulfilling the best interests of the principal. Agency theoryis the basis used in understanding corporate governance issues by obtaining causationfrom an asymmetrical relationship between owners and managers that needs to be avoided
to make the company better. Agency theory is a relationship or contract between principal
and agent. The principal employs agents to perform tasks to fulfill the principal's interests
in implementing the concept of Good Corporate Governance.
Governance Risk & Control
Referring to the International Standards for The Professional Practice of Internal Auditingthat the internal audit activity must evaluate and contribute to the improvement oforganizational governance, risk management and control processes by using a systematic,orderly, and risk-based approach. The credibility and value of internal audit is realized
when the auditor is proactive with evaluation results that can provide new insights,
consider future impacts, assess, and provide appropriate recommendations to improve theorganization's governance processes and contribute to improving the risk management
process. The internal audit activity must assist the organization in maintaining effective
controls by evaluating their efficiency and effectiveness and promoting continuous
improvement.
Teori Efektivitas
Effectiveness is the use of resources, facilities and infrastructure in a certain amount that is
consciously determined beforehand to produce several jobs on time (Abdurahmat, 2008).
Effectiveness is related to the implementation of all main tasks, goal achievement,
timeliness and active participation of members and shows the degree of conformity
between the stated goals and the results achieved. Effectiveness can be interpreted as aprocess of achieving a predetermined goal.

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Good Corporate Governance
The
National
CommitteeonGovernance
Policy(2016)
issuedvia
http://www.ecgi.org/codes/documents/indonesia_cg_2006_id.pdf as general guidelines for
Good Corporate Governance (GCG) Indonesia which states that GCG is a reference forcompanies in order to encourage the achievement of a sustainable company throughmanagement based on the principles of transparency, accountability, responsibility,
independence as well as fairness and equality by taking into account the interests of thecompany's stakeholders with the aim of increasing the company's competitiveness bothnationally and internationally. The principles of GCG (Indonesian Minister of BUMN,
2002) there are transparency, accountability, independence, and fairness: fairness andequality in fulfilling stakeholder rights that arise based on agreements and applicable laws
and regulations.
The Institute of Internal Auditors Research Foundation, Chapter 4: Assurance andConsulting Service (Urton Anderson, 2003)
Internal audit functions in providing added value to the organization by conducting
Assurance & Consulting Services. Auditing and assurance standards are the main
mechanisms that have been developed to protect the interests of third parties and enableefficient assignment of services.

Figure 1. Assurance/ Consulting Continuum (The Institute of Internal Auditors Research
Foundation, 2003)

The difference between assurance and consulting activities:
1. Assurance engagements require an opinion on the results of the engagement.
Consulting engagements result in recommendations if there is a formal request
accompanying them.
2. Assurance engagements are mandatory, so that the audit function cannot unilaterally
decide not to perform this engagement after it has been identified as a required area.
Consulting engagements may be rejected by the audit function without requiring
justification.
International Standard for Professional Practices Framework (IPPF) (The Institue ofInternal Auditors, 2017)
The IPPF Standard states that internal audits are carried out in various legal and culturalenvironments in various organizations that have various objectives, sizes, complexities,
structures and are carried out by various parties both inside and outside the organization.
Although differences may affect internal auditing practices in each environment or
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Asian Journal of Management Sciences & Education Vol. 12, Jan-Dec 2023__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

organization, compliance with standards is essential in fulfilling internal audit
responsibilities and internal audit activities.
Guidance on the nature of consulting services be defined in the Internal Audit (IA) Charterusing Practice Advisory 1000.C1-1: Principles Guiding the Performance of Consulting
Activities of Internal Auditors consist of:
1. Value Proposition: internal audit activities are embodied in every organization thatinvolves internal audit in a way that is appropriate to the culture and resources of theorganization.
2. Consistency with Internal Audit Definition: a systematic evaluation methodology thatis included in every internal audit activity.
3. Audit Activities Beyond Assurance and Consulting: assurance and consulting are notmutually exclusive and do not preclude one another from auditing services such as
investigative and non-audit roles.
4. Interrelationship Between Assurance and Consulting: internal audit consulting canenrich the added value of internal audit.
5. Empower Consulting Through the Internal Audit Charter: empower internal audit
activities to perform value-added services that do not become a conflict of interest or
reduce obligations to the committee.
6. Objectivity: increase the auditor's understanding of business processes or issues related
to assurance assignments and does not necessarily damage the auditor or theobjectivity of internal audit activities.
7. Internal Audit Foundation for Consulting Services: performs types of consulting work
based on standards of objectivity and breadth of knowledge about organizational
processes, risks and strategies.
8. Communication of Fundamental Information: providing assurance to Senior
Management and the Chairman of the Audit Committee in a context that must be
understood by all.
9. Principles of Consulting Understood by the Organization: basic rules for the
performance of consulting services that are understood by all members of theorganization and these rules must be included in the IA Charter which is approved by
the audit committee and promulgated in the organization.
10. Formal Consulting Engagements: enable internal audit activities to have uniquequalifications for several formal consulting assignments, so that internal audits arecarried out in a systematic and disciplined approach.
11. CAE Responsibilities: allows the Head of Internal Auditor to have a dialogue withmanagement to discuss specific issues responsive to management's needs.
12. Criteria for Resolving Conflicts or Evolving Issues: internal auditors are the first andforemost of internal audit assignments guided by the Code of ethics and The IIA's
Standard Attributes and Performance Standards from the International Standards for
the Professional Practice of Internal Auditing.
Guidance on providing formal consulting understanding using Practice Advisory 1000.C12: Additional Considerations for Formal Consulting Engagements consist of:
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1. Glossary for defining consulting services.
2. The Head of Internal Audit must determine the methodology to be used to classify his
involvement in the organization.
3. Internal auditors may perform consulting services as part of normal or routine
activities in response to management requests.
4. Auditors generally do not agree to undertake consulting engagements simply to avoid
or to allow others to disagree.
5. Independence and Objectivity in Consulting Engagements (Standard 1130.C1)
a. The Chief Internal Auditor must confirm that the Board understands and approves
the concept of providing consultancy services for the IA Charter.
b. Internal auditors must maintain their objectivity when drawing conclusions andoffering advice to management.
c. Independence and objectivity are supported by assigning different auditors to
perform each service.
d. Be alert when engaging in ongoing or continuing consulting assignments.
6. Due Professional Care in Consulting Engagements (Standards 1210.C1, 1220.C1,
2130.C1, and 2201.C1)
a. Formal consulting engagements by understanding the needs of the management
officer.
b. Evaluation of independence and objectivity must conduct adequate meetings andcollect the necessary information.
7. Scope of Work in Consulting Engagements (Standards 2010.C1, 2110.C1 and C2,
2120.C1 and C2, 2201.C1, 2210.C1, 2220.C1, 2240.C1, and 2440.C2)
a. Understand the purpose and scope of a consulting engagement.
b. The design goals are appropriate to meet the expected needs.
c. Documentation of objectives, scope and methodologies to be used in meeting theobjectives.
d. Effectiveness of risk management and control processes during formal consulting
engagements.
8. Communicating the Results of Consulting Engagements (Standards 2410.C1 and2440.C1):
a. The format for communicating the results of the consulting engagement should
clearly describe the nature of the engagement and any limitations, restrictions, orother factors regarding the users of the information that must be notified.
b. Reports are expanded with results communicated to appropriate parties.
c. Appropriate description of the type of engagement and recommendations
communicated and fulfilled responsibilities.
9. Documentation Requirements for Consulting Engagements (Standard 2330.C1)
a. Documentation of work results is carried out based on formal consulting
assignments.
b. Adopt record/document retention policies, such as retention of consulting
assignment documents.
10. Monitoring of Consulting Engagements (Standard 2500.C1)

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Asian Journal of Management Sciences & Education Vol. 12, Jan-Dec 2023__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Efforts to monitor the results of consulting assignments as the factors agreed in theassignment engagement or the internal auditor's assessment of the project's risk orvalue to the organization.
Professional Standards, Internal Audit and Manual Audit of ABC
Based on the ABC Internal Audit Professional Standards (IAPS) that in carrying out audit
and evaluation assignments, standards are needed that regulate the ethics and behavior of
auditors so that objectivity and reliability can be accounted for. The purpose of this IAPS
is to establish basic principles that represent internal audit practices that should be
implemented, become a framework reference, and form the basis for measuringperformance and was prepared referring to the Internationally recognized Standards forProfessional Practice of Internal Auditing (SPPIA) issued by the Institute of Internal
Auditors (IIA). Internal Audit (IA) ABC Charter is an internal audit guideline with the
ABC Internal Audit Professional Standards (SPIA) and has received approval from theLeaders and Supervisory Board of the Organization as a guideline for the implementationof internal control in accordance with the Corporate Strategy to support the achievementof the Company's goals and to support compliance with the principles GCG and laws andregulations. The ABC Internal Audit Professional Standard (IAPS) states that the Head ofInternal Audit must establish policies and procedures as guidelines for the implementationof internal audit function activities, one of which is the Audit Manual that defines Internal
Audit is an activity that provides independent and objective assurance and consulting
services designed to provide added value and improve organizational operations.
MODEL FRAMEWORK

Figure 2. Model Framework of ABC Internal Consulting Effectiveness Evaluation

The application of the guiding principles of consulting at ABC refers to Practice Advisory
1000.C1-1 and application of formal consultancy guide suggestions refers to Practice
Advisory 1000.C1-2.

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Asian Journal of Management Sciences & Education Vol. 12, Jan-Dec 2023__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________METHODSThis study uses several research methods carried out by collecting and analyzing data tofind out the implementation of internal consulting at ABC as shown in the following table:
Table 1. Characteristics of StudyN

Karakteristik Penelitian

Jenis

o
1

MethodQualitative2

Objective

Decriptive

3

Inquiry Type

Case Study

4

Research Engagement

Observation

5

Units of Analysis

Internal Company

6

Research Setting

Non-Contrived Setting

7

Research Tim

Longitudinal/ Time series

The systematic stages of research are as follows (Sekaran, 2006):

Figure 3. Stage of Research (Sekaran, 2006)

1. Observation: researchers want to explore the effectiveness of the implementation ofinternal consulting at ABC because it has important consequences for the company.
2. Gather Preliminary Data: researchers collected documentation on the implementationof internal consulting at ABC for the 2010-2018 period and sought more in-depth
information about the effectiveness of internal consulting implementation.
3. Theory Formulation: the researcher combines all the information logically so that thefactors related to the problem to be studied can be conceptualized and tested. Further
scientific data collection
4. Scientific Data Collection: researchers collect data related to each variable that needs
to be collected.
5. Data Analysis: the researcher analyzes the data collected.
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6. Deduction: researchers draw conclusions by interpreting the meaning of the results ofdata analysis so that they can then propose recommendations for solutions to a
problem.
RESULT AND ANALYSIS
ABC’s Practice Advisory 1000.C1-1: Principles Guiding the Performance ofConsulting Activities of Internal Auditors
1. Value Proposition: it has been effectively implemented but there is an opportunity for
improvement (Opportunity for improvement) regarding the socialization of internal
audit guidelines, including the IA Charter and other audit documents to allorganizational units both at the Head Office and in the Areas.
2. Consistency with Internal Audit Definition: has been effectively implemented with asystematic evaluation mechanism and methodology in place for each internal audit
activity for assurance and consulting services through documentation of monitoring
and follow-up which is carried out annually.
3. Audit Activities Beyond Assurance and Consulting: has been effectively implemented
with the IA Charter concerning assurance and consulting assignments that are notmutually exclusive and hinder each other because it is clearly stated in the terminologyof the definition of Internal Audit.
4. Interrelationship Between Assurance and Consulting: has been effectively
implemented with the condition that the relationship between the two assignments cancomplement each other and add value to one another.
5. Empower Consulting Through the Internal Audit Charter: has been effectively
implemented with many services that can be provided by the internal audit needed by
the company to provide values for progress and goals.
6. Objectivity: has been implemented effectively by not taking over responsibility for
implementing recommendations that are the responsibility of management withouttransferring responsibility to the internal audit.
7. Internal Audit Foundation for Consulting Services: has been effectively implemented
where consulting assignments have so far come from assurance assignments,
investigations and other assignments carried out by internal audit.
8. Communication of Fundamental Information: has been effectively implemented where
the internal audit in carrying out its duties must be responsible, coordinate and provide
confidence to the Audit Committee and Main Director.
9. Principles of Consulting Understood by the Organization: has been effectively
implemented by having the main basic rules for the performance of consulting services
contained in the IA Charter but needs to be improved again in terms of understandingof the assignment/consulting services to all members of the organization.
10. Formal Consulting Engagements: have been effectively implemented where consulting
activities are carried out with the main concern being to increase the effectiveness ofrisk management, control and good corporate governance processes and the aim is toincrease value and improve operations and is carried out with a systematic approach.

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11. CAE Responsibilities: has been effectively implemented where the dialogue between
the Head of Internal Audit and the Audit Committee and the Main Director to discussspecific matters as contained in their functional responsibilities and in coordination
meetings that report audit results, recommendations, follow-up on audit findings
significant and in the operational reporting of Internal Audit.
12. Criteria for Resolving Conflicts or Evolving Issues: has been effectively implemented
by having Internal Audit Professional Standards (IAPS) that regulate the ethics andbehavior of internal auditors so that they are objective and reliable and serve as aframework reference and form the basis for performance measurement and have been
prepared with reference to the Standards for Professional Practice of Internal Auditing
issued by the Institute of Internal Auditors (IIA).
ABC’s Practice Advisory 1000.C1-2: Additional Considerations for Formal
Consulting Engagements
1. Definition of Consulting Services Based on the Standards: effectively implemented but
needs improvement in consulting in the future.
2. Determine the Methodology: a more in-depth and comprehensive study is still needed
because so far there has been no decision that combines the assurance and consulting
assignments into one consolidated approach approach.
3. Part of Normal or Routine Activities in Response to Management Requests: effectively
implemented where the internal auditor has provided consulting services on normal or
routine activities referring to the method that has been owned and based on
management's request.
4. Assignment Based on Principles: effectively implemented by specifically defining
Consulting as an activity of providing alternative solutions and other related services
needed by clients, whose nature and scope of assignment has been agreed upon withclients aimed at adding value and improving the company's governance processes.
5. Understand and Approve the Concept of Providing Consulting Services: effectively
applied where the Internal Audit (IA) terminology of assurance and consulting
activities that are independent and objective, with the aim of increasing value andimproving the company's operations, through a systematic approach, by evaluating andimprove the effectiveness of risk management, control, and corporate governanceprocesses.
6. Objectivity in Conclusion and Offering Advice to Management: effectively
implemented where the internal audit carries out assurance and consulting activities
carried out independently and objectively and is designed to add value and improve thecompany's operational performance in accordance with the Internal Audit Professional
Standards.
7. Potential Interference with Independence and Objectivity: effectively implemented byassigning different auditors to perform each service, establishing independent
management oversight, defining the separation of responsibilities for the results of theassignment, and disclosing it.
8. Care Should be Taken: effectively implemented where care has been taken, both in the
involvement of assurance and consulting assignments, so that the internal auditors
have no concern regarding management's responsibilities as not in line with theobjectives and scope of consulting assignments.
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9. Due Professional Care in Conducting a Formal Consulting: effectively implemented
where the Internal Audit function must be free from various influences, bothindividuals and organizations within the Company are responsible for complying with
the Internal Auditor's Code of Ethics contained in the Internal Audit Professional
Standards (SPAI).
10. The Internal Auditor Should Coordination with Client: effectively implemented, but in
its implementation so far there are still opportunities for development.
11. The Objectives and Scope of the Consulting Engagements: effectively implemented
where the internal auditor must master an understanding of the objectives and scope ofa consulting engagement with clients who receive services.
12. Design Goals to Meet the Expected Needs of the Management: effectively
implemented with a formal consulting assignment plan, so that internal auditors mustdesign goals to meet the expected needs of clients who receive this service, including
when there are special requests.
13. Documenting the Purpose and Scope of the Assignment as well as the Methodology to
be Used in Meeting the Objectives: effectively implemented where formal consultation
assignments have documented the objectives and scope of the assignment and themethodology to be used in meeting the objectives.
14. Consider the Effectiveness of Risk Management and Control Processes: effectively
implemented where the internal auditor has paid attention to the effectiveness of risk
management and control processes during formal consulting assignments and forcertain situations.
15. Communication of the Progress and Results of Consulting Engagements: only the
results of consulting assignments submitted to clients and for reporting are generally
determined by internal audit and there has been no communication of the progress ofthe progress submitted to the client, so related advice guidelines need to be reviewed
comprehensively.
16. Reporting the Results to the Right Parties: the internal auditors have submitted theirresults to the Audit Committee and the Main Director, so that the related advice
guidelines need to be reviewed comprehensively.
17. Disclose to Management and Audit Committee: effectively implemented where so far,the internal audit has disclosed the results of assurance and consulting to Clients, theAudit Committee, and the Board of Directors.
18. Documentation of a Formal Consulting Engagement and Support its Results:
effectively implemented where the internal audit has documented the results ofconsulting assignment work.
19. Documentation Retention Policies: effectively implemented where the internal audit
complies with existing and applicable regulations.
20. Monitoring of Consulting Engagements: effectively implemented where the internal
audit monitors the results of consulting assignments.

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CONCLUSION AND RECOMMENDATION
1. An organization or company in implementing internal consulting should refer to theexisting guidance. This research uses Practice Advisory 1000.C1-1: Principles
Guiding the Performance of Consulting Activities of Internal Auditors and Practice
Advisory 1000.C1-2: Additional Considerations for Formal Consulting Engagements.
Both guidelines come from the International Standards for The Professional Practiceof Internal Auditing (IPPF-Standards-2017).
2. Based on Practice Advisory 1000.C1-1 and C1-2, most of the principles are inaccordance with the implementation of internal consulting at ABC and there are
principles that will be developed and studied in a comprehensive manner further. And
these various suggestions if implemented optimally will have a good effect and impact
in implementing formal consultancy in an organization or company.

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