According to a recent Gallup Poll, about 55 percent of Americans report they invest in the stock market, which is consistent with historical trends. The statistics vary in other countries, but the fact is that hundreds of millions of individuals around the world, directly or indirectly, are risking their retirement income and financial well-being based on how well the companies they invest in are run.

As more investors seek to benefit from a growing marketplace, they should be cautious when deciding which companies are worthy of their hard-earned dollars. Not only should they understand an organization’s business model and the risks facing the economy, industry, and company, but they should also understand how well a company is managed. But in doing so, the tendency is for investors to look mostly at the quality of the board of directors, as well as the track record of the CEO and management team.

That can prove deceiving. After all, even Enron had a great track record until it didn’t. The lesson from Enron — and other companies that suffered similar albeit less spectacularly tragic fates — is that investors shouldn’t overlook a company’s tone at the top while they are looking at financial performance. How effectively are risks managed? How ethical is the culture? How strong is the control environment?

These answers are difficult to come by without direct evidence. However, one red flag that should cause an investor’s antennas to go up would be the absence of an internal audit function. While the presence of the function does not guarantee any degree of success for a company, not having one says something about the way the organization’s leadership views strong, effective risk management, internal control, and governance. When a publicly traded company does not have an internal audit function, one must ask, who is providing the board with independent and objective assurance and insight on how well risk and the mitigating controls are being managed? If it is only management, the board may be operating at a disadvantage.

More than a decade ago, the New York Stock Exchange recognized the value of an internal audit function and an equally important direct line of reporting to the organization’s audit committee. It requires all listed companies to have an internal audit function in place, upon or within the first year of listing, depending on the circumstances.

In 2013, the Nasdaq considered adopting a similar requirement. At that time, research by Navigant estimated that 40 percent of Nasdaq-listed companies with market capitalizations between $75 million and $250 million lacked an internal audit function. Unfortunately, a small but loud chorus of misguided views from some sectors prompted Nasdaq to withdraw the proposed rule and, at least to this date, not come back to it.

At the time, I wrote about my great disappointment in that decision. I believe now, as I did then, that a properly structured internal audit function can provide independent, objective assurance and advisory activities that add value and improve an organization’s operations. And it can do so in a cost-effective manner while providing some level of assuring comfort to the investment community.

What’s more, investors should appreciate that an adequately staffed and resourced internal audit function helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, and governance processes. Indeed, internal audit’s mission is to enhance and protect organizational value by providing risk-based and objective assurance, advice, and insight. Who would not see the value in that?

Recognizing the value of internal audit is not restricted to U.S. stock exchanges. The Asian Confederation of Institutes of Internal Auditors recently published a survey of Asian stock exchange perspectives on internal audit. It found stock exchanges or governments in seven of 10 responding nations mandate internal audit functions for exchange-listed companies.

The seven countries and territories are China, India, Indonesia, Malaysia, Philippines, Chinese Taiwan, and Thailand. Additionally, the Hong Kong exchange recommends internal audit on a voluntary basis as part of its Best Practices Code, and the Australian Stock Exchange recommends that each listed company disclose whether it has an internal audit function, how the function is structured, and what role it performs. If not, the exchange recommends disclosing that fact and identifying the process the company employs for evaluating and improving the effectiveness of its risk management and internal control processes.

Each of these exchanges recognize the value that internal audit brings to its listed companies, and prospective investors should assign some additional degree of confidence in exchanges that mandate internal audit functions. But, even under the best circumstances, investing carries risks, and individuals would do well to learn the basics of sound investment strategy before jumping into the deep end of the investment pool. The U.S. Securities and Exchange Commission provides great guidance in this regard with its brochure, “Financial Navigating in the Current Economy: Ten Things to Consider Before You Make Investing Decisions”.

Now, I realize that many colleagues out there would like to see that exchanges not only require internal audit but further mandate that the function be held to mandatory conformance to a set of globally recognized standards, such as The IIA’s Standards. I would too. But as they say, one step at a time.

Further, I would be remiss if I did not say that organizations also should take this counsel to heart. Just as individuals should investigate potential investment targets for sound internal control, so should organizations consider that same when it comes to entering into potential business relationships, partnerships, or third-party service contracts. Third-party risks are greatly exacerbated at all levels when a good internal audit function is not in place to offer assurance.

I urge internal auditors to share the messages in this blog widely as part of a grass roots advocacy initiative around the world. Occasionally, when companies fail and shareholder investments have been squandered, someone asks “where were the internal auditors?” In reality, the question that should often be asked is “why weren’t there internal auditors?” Let’s work together to enhance the awareness about the risks that accompany the absence of internal audit in publicly traded companies.

I’d like to hear your thoughts about how organizations’ commitment to good governance, risk management, and internal control processes can be made more transparent to investors and how internal audit is central to that.