Internal auditors can expand roles with changing business environment

Thursday, 31 March 2011 00:58 - - {{hitsCtrl.values.hits}}

PwC US recently announced the results of its seventh annual Global State of the Internal Audit Profession survey, which found that as companies emerge from the recession, internal auditors have the opportunity to elevate their roles by aligning their business objectives with new company priorities.

The survey of more than 2,500 executives from more than 50 countries found that internal audit professionals that have a macro view of their companies can play a significant role supporting company growth strategies through their involvement with areas such as emerging markets, mergers and acquisitions, social media, the cloud and navigating the regulatory labyrinth. However, the survey indicated that many internal auditors are not addressing the risks related to these strategies.

“Now that the financial crisis has largely passed, the big questions facing CEOs are in growth and the future,” said Brian Brown, principal and Internal Audit Performance Improvement leader at PwC. “While it’s a good place to be, there are still risks involved and internal auditors need to offer guidance on these emerging risks, like regulatory compliance in new markets or reputational risks related to social media.”

For example, this year’s survey showed a disparity between CEOs’ and internal auditors’ main focus when it comes to risk areas such as growth and technology. While CEOs are focused on growth in newer geographic markets, internal auditors indicated that they are least involved in those areas. Similarly, while 70 percent of CEOs plan to invest in IT, less than 25 percent of internal auditors plan to be involved in auditing the risks of cloud computing or social media.

CEOs and internal auditors have a shared focus on government regulation, as overregulation ranks among CEOs’ top concerns and nearly 60 percent of internal auditors expect to increase their attention to regulatory compliance programs in their audit plans.

The study identified three important focus areas for internal audit departments and the risks, including:

Strategic growth: Emerging markets, mergers and acquisition activity, innovation and new product development

Information technology: Security and data protection risks related to emerging technologies such as eMobility and cloud computing, data lass and distribution of malware

Regulation: The expanding reach of regulations, changes due to financial reform, and sustainability reporting

“It is important that internal audit leaders stay on top of CEO business strategies,” Brown said. “Emerging markets, technology and regulation are quickly evolving, and the risks associated are quickly changing as a result. If internal audits can keep up with these changes, CEOs and other company stakeholders will see it as a dynamic business function and elevate its importance to the business.”

As internal auditors reevaluate their roles, PwC suggests they ask themselves the following questions:

Am I leveraging my unique vantage point within the company to provide a clear point of view on the risks associated with the changing business environment?

Have I taken action to adjust capabilities and approaches to today’s business environment?

Am I taking steps to prepare my people for what they will be doing two to three years from now?