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Internal Auditing 2012: Trends and Outlook for the Global Profession

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Internal Auditing 2012: Trends and Outlook for the Global Profession Richard Chambers, President and CEO CIA, CCSA, CGAP, CRMA The Institute of Internal Auditors – PowerPoint PPT presentation

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Title: Internal Auditing 2012: Trends and Outlook for the Global Profession


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

2
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 Whats Next for Internal Audit?

3
Identify and Align With Stakeholder Expectations
4
The New Order Is Creating New Expectations for
Internal Auditing
Stakeholder Value Expectations
Board Assurance and no surprises / eyes and ears
Executive Assurance, value for money / management tool
Line Management Help, controls assurance, recommendations / management control
Internal Audit Staff Career, development, exposure, making a difference / WIFM
External Audit Combined assurance, information sharing / substantive testing
Regulators Objective opinion, peace of mind / investigators
Community Social responsibility, protecting the economy
Shareholders Value protection, whistleblowers
5
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
Audit Committee Executive Management
Unacceptable 0.0 0.4
Poor 0.4 1.9
Acceptable 16.1 25.9
Good 57.6 57.8
Outstanding 25.9 14.0
Source Emerging Trends and Leading Practices
Spring 2011, The Institute of Internal Auditors
Audit Executive Network
6
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
7
Ascending to the Level of A Trusted Advisor
8
Step Up to the Plate in Risk management
9
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

10
Internal Auditings Role in Risk Management
11
Focusing on the Real Risks
Key Imperatives for the Coming Decade Fully
Embrace a Risk-Centric Strategy
Operational 20
Strategic Business 60
Financial 15
Compliance 5
12
Become More Efficient With Limited resources
13
Enhance Capacity Through Innovation
  • Sourcing solutions that are
  • Strategic
  • Innovative
  • Efficient
  • Reengineer processes
  • Risk assessment
  • Engagement planning
  • Reporting
  • Leverage technology

14
Strive to Demonstrate Quality
15
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

16
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

17
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
  • ??90 of stakeholders indicate that 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
18
Enhance our Ability to provide Insight
19
Value Proposition for Key Stakeholders
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.
20
Insight Catalyst, Analyses and
Assessments Internal audit is a catalyst for
improving an organizations 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 audits
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.
Insight Defined
21
Research Results
  Should Deliver In General, IA Delivers My IA Delivers Frequently Delivers
  SA/A SA/A SA/A A/F
Internal Audit 90 72 81 66
Board 86 77 79 61
Executives 89 57 56 38
Overall Result 89 71 76 60
SA/A Strongly Agree/Agree A/F
Always/Frequently
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
22
Closing the Gap Key Enabling Factors
Strong control environment and tone at the top in the organization 62
Board and management expectations for value delivery from the internal audit function 59
CAE reporting relationship that supports independence of the internal audit function 55
Highly competent CAE 50
Internal audit personnel with significant industry and organizational knowledge 46
23
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

24
The Path Forward Whats Next For Internal Audit
25
CBOK 2010 Imperatives for Change
1. Sharpen Your Focus on Risk Management and Governance 6. View Compliance with The IIAs International Standards as Mandatory, Not Optional
2. Conduct a More Responsive and Flexible Risk-based Audit Plan 7. Acquire and Develop Top Talent
3. Develop a Strategic Vision for Internal Auditing 8. Enhance Training for Internal Audit Activities
4. Focus, Monitor, and Report on Internal Auditings Value 9. Take Advantage of Expanding Service Provider Membership
5. Strengthen Audit Committee Communications and Relationships 10. Step up Your Use of Audit Technology and Tools
26
The CBOK Study Top Five Internal Audit Activities
Rank Currently Performed Next Five Years
1 Operational audits Corporate governance reviews
2 Compliance audits ERM reviews
3 Auditing of financial risks Strategic reviews
4 Fraud investigations Ethics audits
5 Evaluation for internal control Migration to IFRS/Social and Sustainability audits
27
Questions?
28
  • The Institute of Internal Auditors
  • Richard Chambers, CIA, CGAP, CCSA, CRMA
  • President Chief Executive Officer
  • richard.chambers_at_theiia.org
  • Twitter _at_rfchambers
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