Current Challenges Facing Internal Auditors

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Current Challenges Facing Internal Auditors
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Current Challenges in Internal Audit

• Agenda
• The State of the Profession
• Challenge Drivers
• Five challenges facing Internal Auditors
• Some Solutions to meet the Challenges
• Wrap-up

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Sarbanes-Oxley Impact on Internal Audit
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Internal Audit Leadership Criteria

• Our leader of Internal Audit will be a strategic
  business partner to the CEO an executive who
  acts as an active contributor to the thinking
  that drives our business has the vision to
  originate ideas the business acumen to advise
  and recommend executable strategic moves
  constantly alert to trends and communicating same
  to the business leadership and, a counselor and
  advisor who can impart insights and views that
  others often overlook.
• Source Talent Requirement for Internal Audit and
  Compliance Executives, Korn Ferry 2004 and IIA

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CHALLENGES IN INTERNAL AUDIT

• Challenge Drivers - Change !
• Technological innovation
• Organizational changes
• Globalization
• Legislation and Regulations
• Mergers and acquisitions
• Strategic alliances
• Stakeholders demanding increased accountability

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CURRENT CHALLENGES IN INTERNAL AUDIT

• BECOME RELEVANT/MAINTAIN RELEVANCE
• RELEVANCE
• HAVING SIGNIFICANT DEMONSTRABLE BEARING ON THE
  MATTER AT HAND THAT IS, GOVERNANCE, RISK
  MANAGEMENT AND CONTROL

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FINANCIAL CONTROLS FOCUS VERSUS COMPREHENSIVE
REVIEWS

• gt Corporate Failures
• Sarbanes Oxley, et al
• Operational Audits
• Governance Audits
• Accurate financials but still bankrupt

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FEAR TO TREAD BUT NEED TO TREAD

• EXECUTIVE COMPENSATION
• CONFLICTED DIRECTORS/SENIOR MANAGERS
• CORPORATE SOCIAL RESPONSIBILITY

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LACK OF EFFECTIVE
RISKMANAGEMENT AND GOVERNANCE INVOLVEMENT

• Enterprise Risk Management
• Entity Risk Management
• Risk-based audits
• Governance issues
• Code of Ethics
• Policies and Procedures
• Annual Certifications

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COMPETENT 21ST CENTURY AUDITOR

• Risk-based orientation
• Global perspective
• Governance expertise
• Technologically adept
• Business acumen
• Creative thinker and problem solver
• Strong ethical compass
• Superb communicator
• Relationship expert
• Unquestioned leadership ability
• Impactful presence
• Collaborative
• Source Talent Requirement for Internal Audit and
  Compliance Executives, Korn Ferry 2004 and IIA

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GREATER STAKEHOLDERS EXPECTATIONS

• gtPCAOB Auditing Standard No. 2
• - Paragraph 121
• . Internal auditors normally are expected to
  have greater competence with regard to internal
  control over financial reporting and objectivity
  than other company personnel
• Mandated in US and other countries

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MEETING THE CHALLENGE

• FOCUS ON STRATEGIC PLAN AND INITIATIVES
• STAY CURRENT ON TRENDS, LEGISLATION, REGULATIONS
  AND RISK MANAGEMENT
• SHARE INFORMATIONACROSS THE ORGANIZATION
• SHARE KNOWLEDGE AND INFORMATION REGARDING AUDIT
  COMMITTEE NEEDS
• IMPROVE STATURE WITHIN THE ORGANIZATION
• FOCUS ON DEVELOPING STRONG RELATIONSHIPS
• LEVERAGE THE AUDIT COMMITTEE AS A SOURCE OF
  SUPPORT
• DEMONSTRATE INTEGRITY AND PROFESSIONALISM

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Our CUSTOMERS SHOULD see us as a strategic
advantage toward achieving their objectives
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What is a best practice?

• Change agents
• Innovation
• Improves utilization of resources
• Results
• Challenges us to take risks
• Future focused

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Balanced Scorecard Key Focus Perspective
Financial Perspective
Internal Process Perspective
Customer Perspective
Balanced Scorecard
People Technology Perspective
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Relationship Building

• Who What type of relationship
• Audit Committee
• Management
• External Auditors
• Customers
• How
• Visits Marketing vs. Sales
• Communications Services Results
• Agenda strategy Key customers
• Link staff to customer

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Communicate Value

• Value Definition
• Value
• Communicate Value via
• Annual Plan
• Audit Reports
• Surveys
• Annual Performance Results Rpt.
• Performance Measures Value
• KPIs
• Incentive Compensation Goals

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Adding Value
VALUE That attribute which enables something
to be thought of as being useful, desirable and
having a monetary impact while being held in
esteem because of its quality and price
competitiveness
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Customer Focus

• Planning
• Risk Assessment
• Audit Involvement
• Resolution of issues
• Audit Report review comment
• Unplanned work
• Problem solving
• Consulting assignments

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Annual Audit Plan Development

• Understanding the business
• Collecting information
• Identifying key risks
• Prioritizing risks (value contribution, customer
  interest, risk magnitude)
• Assigning projects to address high risk areas
• Communicating with BU leaders
• Clarifying balancing workloads

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CURRENT CHALLENGES IN INTERNAL AUDIT

• EVEN IF YOURE ON THE RIGHT TRACK YOULL GET
  RUN OVER IF YOU JUST SIT THERE.
• ARTHUR GODFREY