2009

As the decade comes to a close, the media seems to be awash with re​ports ​reflecting o​​n milestones of the 2000s. Some have focused on the top new stories of the decade, while others focus on entertainment milestones, such as the best movies or sports events over the past 10 years. This has gotten me thinking about the most significant events of the past decade that have impacted the profession of internal auditing. I’m sure there were many events in global regions or individual countries that would make the list depending on where you practice int​ernal auditing; however, I’ve compiled my list of the five events that defined the decade for internal auditors.…

Throughout my career of more than 30 years as an internal auditor, I’ve seen several recessions come and go, and the impacts on the internal audit profession have followed predictable patterns each time. I’ve seen operating environments shift and require internal auditors to reach into their skill toolbox and demonstrate their agility and versatility. The recessions we’ve experienced in the past, and the one we’re facing currently, also foster an environment much more conducive to fraud schemes, and the internal audit activity is in a perfect position to show its value during these times.

As a federal inspector general in the U.S. government, I learned a great deal about the motives and circumstances that lead to fraud. I…

One of the most predictable consequences of corporate financial failures is the inevitable finger-pointing that follows. There was plenty of finger-pointing following the Enron, WorldCom, and other failures of the early 2000s, and it was sure to happen again following the financial failures of the past two years. Lately, however, I have noticed that the accusations are literally “going global.” As important as it is to understand the contributing factors, I believe it’s time to move forward with the design and implementation of corrective measures in corporate governance and risk management that will effectively mitigate the risks of calamities of this magnitude in the future.​​​​…

As I have commented often in recent months, the current economic crisis has not been kind to internal auditing. Granted, we have not seen the level of layoffs or staff reductions that we may have seen in other professions, but there is plenty of evidence that our Sarbanes-Oxley era of prosperity has come to an abrupt halt. Following years of healthy growth, many internal aud​it activities reported budge​​t and staffing reductions in 2008. This pain was nothing compared to what 2009 would bring. A recent Knowledge Alert (PDF) from The IIA’s Audit Executive Center (available to Audit Executive Center​ members) reports on the results of a North American survey about the impacts of the economy on internal audit activities.…

Greetings from Canada, where I am attending the second annual Canadian Conference in Quebec City. I am impressed with the energy and enthusiasm of the profession here, and the conference has been packed with informative and timely sessions that address the challenges and opportunities facing internal auditors. The conference will close with an afternoon Canadian Audit Leaders Forum, and I have been asked to deliver some remarks to open the event. Among other topics, I plan to highlight for the audience what I view as the characteristics of a highly successful 21st century chief audit executive (CAE).​

Over the past few years, I have had the opportunity to partner with, and assess the internal audit operations of, dozens of extraordinarily talented CAEs.…

Greetings from San Diego, where The IIA’s aptly titled conference, “Internal Audit Solutions for Tough Times,” is wrapping up. It has been a great event with some very thought-provoking discussions on how the global economic crisis is impacting our profession. In a pre-conference survey of U.S. internal audit practitioners, we learned:

• 74 percent of internal audit functions experienced flat or declining budgets in 2009.
• Almost one-third experienced outright reductions over the past 12 months.
• The outlook for 2010 does not look much better with 80 percent anticipating flat or declining budgets.
• 57 percent have increased coverage of operational risks in the past year.

I have often characterized internal auditing’s journey over the past decade as being one from “the back room to the board room.” Following the spectacular corporate failures in 2001-2002 — and the subsequent regulatory and legislative response — internal auditing found itself front and center with the audit committee and other members of the board. The rapid elevation of stature was reflected in reporting relationship statistics. In 2002, The IIA found that only 55 percent of U.S. chief audit executives (CAEs) reported functionally to their audit committees. By 2007, PricewaterhouseCoopers found the number had leaped to 86 percent. In the past two years, internal auditing’s emphasis on assessing the effectiveness of financial controls has abated significantly.…

By now Cynthia Cooper’s story at WorldCom has assumed legendary status in our profession. Internal auditors even brought up her name during my recent travels in China, Hong Kong, and Japan. Almost everyone in our profession, it seems, believes that her steadfast pursuit of financial fraud at WorldCom almost eight years ago raised the stature of our profession and exemplified the best in what we aspire to be. After all, it is not every day that an internal auditor is named one of Time magazine’s “Persons of the Year.”

All of us would like to believe we would have the courage and fortitude to do what Cynthia and her team did at WorldCom.…

This week, I am embarking on what I’m sure will be an unforgettable experience. At the invitation of the Asian Confederation of Institutes of Internal Auditors (ACIIA), I will be honored to meet with our colleagues at IIA–Chin​a. Known throu​ghout the world for its rich culture and traditions, China’s vast landscape is home to a thriving internal audit profession. It will be exciting to meet with them and see first-hand the incredible success of their national institute, as well as meet with distinguished government officials, business leaders, and regulators.

While on this incredible journey, I will have the privilege to meet with Mr.…

From the very first day I became an internal auditor, the word “independence” took on particular significance. As a young auditor in government, we were taught from the beginning that “independence” was the foun​dation upon which internal auditing’s credibility and effectiveness was based. Over the years, our audit standards were strengthened to mandate reporting relationships that fostered independence. Yet, even when I first assumed the role of a chief audit executive (CAE) in the late 1980s, I was vaguely uncomfortable with touting “independence” when I was clearly employed by the organization in which I worked. I watched way too many “independent” CAEs meet an untimely professional demise for being a bit too “assertive” to assume that I was totally independent.​…