Transcript Slide 1
Internal Auditing 2012: Trends and Outlook for the Global Profession
Richard Chambers, President and CEO CIA, CCSA, CGAP, CRMA The Institute of Internal Auditors
www.theiia.org
Presentation Agenda
•
Five Key Challenges Facing Internal Auditors in 2012
– Identify and align with stakeholder expectations – Step up to the plate in “risk management” – Become more efficient with limited resources – Strive to demonstrate quality – Enhance our ability to provide insight •
The Path Forward – What’s Next for Internal Audit?
www.theiia.org
www.theiia.org
Identify and Align With Stakeholder Expectations
The New Order Is Creating New Expectations for Internal Auditing
Stakeholder Value Expectations
Board Executive Line Management Internal Audit Staff Assurance and no surprises / eyes and ears Assurance, value for money / management tool Help, controls assurance, recommendations / management control Career, development, exposure, making a difference / WIFM External Audit Combined assurance, information sharing / substantive testing Regulators Objective opinion, peace of mind / investigators Community Shareholders Social responsibility, protecting the economy Value protection, whistleblowers www.theiia.org
Meeting Stakeholder Expectations: Are we Being Honest With Ourselves?
“If surveyed today on how well internal auditing is meeting its needs and expectations, my audit committee/executive management would probably rate their overall satisfaction…” Unacceptable Poor Acceptable Good Outstanding
Audit Committee
0.0% 0.4% 16.1% 57.6% 25.9% Source: Emerging Trends and Leading Practices Spring 2011, The Institute of Internal Auditors – Audit Executive Network
Executive Management
0.4% 1.9% 25.9% 57.8% 14.0% www.theiia.org
The View from the Other Side:
• 74% of stakeholders believe IA
needs improvement
• 96% within the next 24 months • Only 44% believe IA helps achieve business objectives • Only 37% involve IA in key business decisions and strategy • Only 32% believe IA attracts future leaders and high potential talent from within the business Source: Ernst and Young Global Internal Audit Stakeholder Survey, November 2010 www.theiia.org
www.theiia.org
Ascending to the Level of A Trusted Advisor
Trusted advisor Compliance function Engaged but not strategic Relationships
Step Up to the Plate in Risk management
www.theiia.org
Risk Management
• Risk management failures were key factors in the financial crisis • Growing pressure on management to strengthen risk management • Growing pressure on boards to demonstrate RM oversight • Internal auditing should play a critical role: – Natural experts on risk management – Champion or facilitate ERM – Maintain a continuous focus on risks – Be capable of addressing the full “portfolio of risks” in audit coverage – Provide assurance on the effectiveness of risk management www.theiia.org
Internal Auditing’s Role in Risk Management
www.theiia.org
Key Imperatives for the Coming Decade: Fully Embrace a Risk-Centric Strategy Focusing on the “Real Risks”
Strategic & Business 60% Operational 20% Financial 15% Compliance 5% www.theiia.org
Become More Efficient With Limited resources
www.theiia.org
Enhance Capacity Through Innovation
• Sourcing solutions that are: – Strategic – Innovative – Efficient • Reengineer processes – Risk assessment – Engagement planning – Reporting • Leverage technology www.theiia.org
Strive to Demonstrate Quality
www.theiia.org
A Comprehensive Quality Assurance and Improvement Program
• Commitment to quality that extends beyond conformance to IIA standards • Formal quality assurance and improvement program including: – Continuous quality controls – Periodic formal internal assessments – Periodic external assessments that include extensive benchmarking /insight on how internal audit compares with peers • Generally includes dedicated resources to manage the professional practices/quality assurance www.theiia.org
Compliance with Professional Standards
• No universal enforcement mechanisms for IIA Standards – 30% still do not have a “formal” quality assurance and improvement program – Up to 60% still have not undergone an external quality assessment www.theiia.org
Compliance with Professional Standards
• More than 70% percent believe compliance with the Standards is a key factor in the ability IA to add value to the governance process adherence to the Standards increases their confidence in internal audit Sources: 2010 Global Internal Audit Survey and 2010 Stakeholder Expectations Survey, The Institute of Internal Auditors www.theiia.org
www.theiia.org
Enhance our Ability to provide Insight
Value Proposition for Key Stakeholders
• • •
Internal Auditing: Assurance Insight Objectivity
Governing bodies and senior management rely on Internal Auditing for objective assurance and insight on the effectiveness and efficiency of governance, risk management and internal control processes.
www.theiia.org
Insight Defined
Insight = Catalyst, Analyses and Assessments
“Internal audit is a catalyst for improving an organization’s effectiveness and efficiency by providing insight and recommendations based on analyses and assessments of data and business processes.” “Insight is an end product or result from internal audit’s assurance and consulting work. Insight can involve ‘connecting the dots’ to deliver value-added results to key internal audit stakeholders. Providing insight may require many IA activities to improve their overall capability, staff competencies, and audit process/practices.” www.theiia.org
Research Results
Internal Audit Board Executives
Overall Result
SA/A – Strongly Agree/Agree
Should Deliver In General, IA Delivers My IA Delivers
SA/A 90% 86% 89%
89%
SA/A 72% 77% 57%
71%
A/F – Always/Frequently SA/A 81% 79% 56%
76% Frequently Delivers
A/F 66% 61% 38%
60%
Survey also provided potential examples of insight delivery to illustrate the concept, and asked CAEs and the stakeholders to evaluate if internal audit
should deliver
, and if internal audit
actually did deliver
, with
what frequency
… www.theiia.org
Closing the Gap Key Enabling Factors
Strong control environment and ‘tone at the top’ in the organization Board and management expectations for value delivery from the internal audit function CAE reporting relationship that supports independence of the internal audit function Highly competent CAE
62% 59% 55% 50%
Internal audit personnel with significant industry and
organizational knowledge 46%
www.theiia.org
Successful Strategies for CAEs
• Assess stakeholder expectations and, if needed, agree on reasonable timeline and approach to closing the gap • Consider reporting relationships and sufficient organizational independence • Align internal audit mission and focus with agreed expectations • Refocus internal audit approach to agree with mission • Critically assess leadership skills and communication styles of the CAE and staff www.theiia.org
The Path Forward: What’s Next For Internal Audit
www.theiia.org
CBOK 2010: Imperatives for Change
1. Sharpen Your Focus on Risk Management and Governance 2. Conduct a More Responsive and Flexible Risk-based Audit Plan 3. Develop a Strategic Vision for Internal Auditing 4. Focus, Monitor, and Report on Internal Auditing’s Value 5. Strengthen Audit Committee Communications and Relationships 6.
View Compliance with The IIA’s International Standards as Mandatory, Not Optional 7. Acquire and Develop Top Talent 8. Enhance Training for Internal Audit Activities 9. Take Advantage of Expanding Service Provider Membership 10. Step up Your Use of Audit Technology and Tools www.theiia.org
The CBOK Study: Top Five Internal Audit Activities Rank
1 2 3 4 5
Currently Performed
Operational audits Compliance audits Auditing of financial risks Fraud investigations Evaluation for internal control
Next Five Years
Corporate governance reviews ERM reviews Strategic reviews Ethics audits Migration to IFRS/Social and Sustainability audits www.theiia.org
www.theiia.org
Questions?
www.theiia.org
The Institute of Internal Auditors Richard Chambers, CIA, CGAP, CCSA, CRMA
President & Chief Executive Officer
Twitter: @rfchambers