Internal Audit Departments Seek Talent for Expanding Strategic Role
New research shows that internal audit departments are getting back to the basics. Firms that have been primarily focused on Sarbanes-Oxley compliance for the past four years have now achieved rebalancing, according to research compiled by Protiviti, a leading global provider of internal audit and risk consulting services. Meanwhile, Ernst & Young’s 2007 Global Internal Audit Survey finds that in the post SOX environment, internal audit departments are increasingly expected to move beyond compliance and financial reporting responsibilities to focus on business and operational risk. Meeting those challenges presents key challenges for internal audit departments, including attracting and retaining the talent needed for their compliance and expanded strategic role. Executive search firm, A.E. Feldman, says accounting jobs exist for candidates who can evaluate and participate in the improvement of clients risk management, controls and governance processes through the use of strategic and technical expertise.
Since the enactment of the Sarbanes-Oxley Act of 2002, a growing number of internal audit departments are now returning to their roots, according to the Protiviti survey. After four years of being focused on SOX, 24% of companies now report that their internal audit departments have achieved “rebalancing,” or a renewed focus on their traditional responsibilities that is balanced with compliance activities. That’s more than double the response from a similar survey conducted in 2005.
“This process of rebalancing is tied closely to the development of a more efficient and sustainable approach to compliance, which is why it takes time to achieve,” says Bob Hirth, Managing Director for Protiviti, and Head of the company’s Global Internal Audit Practice. “However, as the results of our second rebalancing survey indicate, significant progress has been made, Hirth adds. “Companies clearly are seeing the long-term benefits of rebalancing, which include ensuring they do not focus solely on financial reporting at the expense of other critical business operations and functions. At the same time, as a result of Sarbanes-Oxley, there is definitely more financial reporting control-related auditing being conducted, and there is a heightened focus on IT auditing, both of which are positive outcomes of the legislation.”
What is the benefit of rebalancing? Nearly half of the internal auditors polled, 47%, see “being able to perform more traditional audits” as the top advantage derived from rebalancing. According to Hirth, “This is a strong indicator that after more than three years ofSarbanes-Oxley compliance, internal auditors are ready for - recognizea need for - the internal audit function to get back to the basics.” Hirth notes that more traditional auditing includes assisting management and the audit committee in identifying key enterprise-wide business risks, reviewing potential indicators of fraud, and completing focused audits in high-risk areas. IT security, business continuity,revenue processes and capital construction are all considered high-risk areas.
Despite their evolving role, internal auditors are keeping it in-house. Protiviti’s survey concludes that most firms, 43%, made limited use of external assistance in their rebalancing efforts. In fact, 27% had no outside help at all. And in the majority of cases, consultants were used only until a sufficient number of internal audit professionals were hired.
Meanwhile, Ernst & Young’s 2007 Global Internal Audit Survey indicates that due to the scope of internal audit departments knowledge of a company, they are increasingly expected to move beyond compliance and financial reporting responsibilities to implement enterprise risk assessments and focus on business and operational risk. The survey, which polled Internal Audit Directors of 138 predominantly public companies, finds that many departments are moving to align audit coverage with business and operational initiatives and risk areas that include major programs, contract management, international expansion transactions, and major change initiatives. A significant 75% of respondents report involvement in business process improvement, and more than half indicate involvement in contract and major program auditing.
The study finds however, that internal audit departments face key challenges in meeting these expectations, including attracting and retaining the people needed for their expanded strategic role. The survey also finds that significant skills gaps exist in other key risk areas including transactions, tax, major programs, and contract auditing. More than a third of those polled also say they do not have adequate staff with expertise in fraud prevention and detection. Lastly the survey shows that attracting professionals with knowledge of local law and customs for international audit coverage is a major challenge for many large firms.
