The Three Lines Model: Redefining Internal Audit's Role in Organizational Governance
The Three Lines Model: Redefining Internal Audit's Role in Organizational Governance
Blog Article
In a world of increasing complexity and risk, effective governance has become a central focus for organizations aiming to build resilience, drive performance, and maintain stakeholder trust. Among the frameworks guiding organizations toward stronger governance, the Three Lines Model, introduced and updated by the Institute of Internal Auditors (IIA), has become a cornerstone.
This model redefines roles, responsibilities, and relationships across the enterprise, emphasizing the importance of clarity, collaboration, and oversight.
The model also reshapes the role of internal audit — moving it beyond traditional assurance and positioning it as a critical element in organizational governance and strategic success.
From Three Lines of Defense to Three Lines Model
Originally introduced as the Three Lines of Defense, the model categorized organizational roles as follows:
- First Line: Operational management, which owns and manages risks.
- Second Line: Risk management and compliance functions, which oversee risk.
- Third Line: Internal audit, which provides independent assurance.
While widely adopted, the “defense” terminology implied a reactive posture and created siloed perceptions. In response, the IIA updated the model in 2020, renaming it the Three Lines Model and shifting the emphasis from defense to value creation, collaboration, and accountability.
Understanding the Updated Three Lines Model
The updated Three Lines Model focuses less on rigid structures and more on principles that promote effective governance and organizational success. Here's how the model is now structured:
- First Line – Operational Management
These are the individuals and teams responsible for delivering products or services. They own and manage risks directly through their day-to-day decision-making. They implement controls and integrate risk awareness into core operations. - Second Line – Risk and Compliance Functions
These teams support management by providing expertise, support, monitoring, and challenge on risk-related matters. They may include enterprise risk management (ERM), compliance, quality assurance, and control functions. - Third Line – Internal Audit
Internal audit remains independent and objective, with direct reporting lines to the board or audit committee. Its role is to provide assurance on governance, risk management, and controls, helping ensure that the first and second lines operate effectively.
Unlike the older model, the revised version emphasizes shared responsibility and communication between all lines, supported by:
- Governance structures (e.g., boards, audit committees) to ensure accountability and oversight.
- Senior leadership (e.g., CEO, executive team) to align objectives, strategy, and risk management.
Internal Audit's Evolving Role
Under the new Three Lines Model, internal audit is not just a watchdog; it is a strategic partner that helps organizations achieve their objectives by evaluating and improving governance, risk management, and control processes.
This evolved role includes:
- Advisory Engagements: Internal audit can provide insight and advice on new initiatives, systems, and risk areas — without compromising its independence.
- Risk Anticipation: Instead of only assessing historical performance, internal auditors now identify emerging risks and support proactive risk management.
- Governance Evaluation: Internal audit plays a vital role in assessing the effectiveness of governance frameworks, ethics programs, and organizational culture.
This broader scope demands new capabilities. Internal auditors must possess not only technical skills but also strong communication, business acumen, and an understanding of organizational strategy. This is where internal audit consulting can provide a significant advantage.
How Internal Audit Consulting Supports the Three Lines Model
To thrive in their expanded roles, internal audit teams may need support in rethinking their strategies, tools, and skill sets. Internal audit consulting firms offer expertise in aligning audit functions with the principles of the Three Lines Model. Services may include:
- Developing or enhancing risk-based audit plans aligned with strategic objectives.
- Assisting with digital transformation, such as implementing data analytics and automation.
- Providing training and upskilling programs for auditors in areas like ESG, cybersecurity, and agile auditing.
- Conducting quality assessments and performance reviews to benchmark and improve internal audit effectiveness.
By leveraging internal audit consulting, organizations can accelerate maturity, improve audit efficiency, and better integrate internal audit into broader governance structures.
Governance and the Importance of Integration
One of the key messages of the Three Lines Model is integration. The model discourages siloed approaches to governance, risk, and compliance. Instead, it promotes collaboration across all roles and encourages a culture of transparency and accountability.
This integration is especially important in today’s volatile environment, where organizations face complex risks such as:
- Cybersecurity threats
- Regulatory changes
- Supply chain disruptions
- ESG (Environmental, Social, and Governance) concerns
To manage these effectively, the three lines must work in harmony. Internal audit, while remaining independent, can act as a unifying force — helping the board and senior management understand how risk is managed across the organization and where gaps or misalignments may exist.
A Call to Action for Audit Leaders
Implementing the Three Lines Model is not a box-checking exercise — it is a cultural shift. Audit leaders should:
- Reassess their function’s mandate and communicate how internal audit supports organizational success.
- Build strong relationships with first and second line leaders to share knowledge and drive alignment.
- Embrace innovation and technology to increase the relevance and impact of audit activities.
- Invest in continuous learning to ensure their teams have the right mix of skills to meet evolving expectations.
Ultimately, the success of the Three Lines Model depends on trust, clarity of roles, and shared commitment to organizational goals.
The Three Lines Model represents a more modern, dynamic approach to governance. It encourages collaboration while preserving independence, and it repositions internal audit as a value-adding partner in the enterprise.
For organizations looking to strengthen their governance frameworks, adopting this model — and potentially leveraging internal audit consulting expertise — can be a transformative step. As risks grow more complex, the need for a clear, effective, and integrated governance model has never been greater.
By fully embracing its role in the Three Lines Model, internal audit can move beyond assurance and become a true catalyst for performance, trust, and long-term success.
Related Topics:
Aligning Internal Audit Plans with Strategic Business Objectives
Internal Audit's Role in Preventing and Detecting Financial Statement Fraud
Risk-Based Internal Auditing: Focusing Resources on Critical Business Areas
Beyond Compliance: Adding Strategic Value Through Internal Audit Functions
Implementing Data Analytics in Modern Internal Audit Practices Report this page