2021 - Page 5 of 6 - Audit Beacon

March 15, 2021

2021 Pulse of Internal Audit: We Are All in the Same Storm, But Not the Same Boat

It is hard to believe COVID-19 has dominated our lives for more than a year now. Few could have imagined the depth to which it would influence our lives or change how we operate and interact in business and society in general.

One universal truth that has emerged about the pandemic is that the extent of its impact has varied. In some areas of the world, spread of the virus has been more dramatic, as have been the number of deaths. It is sobering to think that more than 2.6 million people worldwide have succumbed to COVID-19, including more than a half million in the U.S.…

March 8, 2021

U.S. SEC: Environmental, Social, and Governance Risks Better Be on Your Radar

Organizations are under increasing pressure from shareholders, regulators, and other key stakeholders to report on environmental, social, and governance (ESG) issues. The movement to accurately measure and report the impacts that organizations have on the environment, climate, natural resources, workforce, and community (and their related ethical implications) is rapidly changing how the public interacts with and values businesses and government institutions.

The business world is clearly responding. In 2011, 20% of companies on the S&P 500 issued reports related to sustainability, according to the Governance & Accountability Institute. Today, that number is 90%. It is not surprising, then, that measuring the accuracy of this new discourse has come under increased regulatory scrutiny.…

March 1, 2021

U.S. Navy Wants to Throw 70% of Its Internal Auditors Overboard

The courageous men and women who risk their lives for our national defense also face dangers from volatile risks, such as cyberattacks and the COVID-19 pandemic. In addition, citizens and taxpayers rightly expect efficiency and effectiveness in defense operations. So why would the U.S. Navy make plans to slash its internal audit budget by 70% over the next two years?

The proposed cuts to the Naval Audit Service budget would effectively dismantle the agency, leaving it with 85 employees compared with its current staff of 290. By comparison, the U.S. Army and Air Force audit agencies execute their missions with more than 600 staff members each.…

February 21, 2021

Why Do They Think Internal Auditors Are Looking for Problems?

Last week, the globally popular business comic strip “Dilbert” took on management’s perception of/reaction to internal auditors. Like all Dilbert strips, there is enough truth in the punchline to grab our attention and be provocative. I must admit that I smiled. I certainly encountered management officials who didn’t want me, or my internal audit team, poking around in their departments. But we always reached some agreement.

After my initial amusement at the comic strip, I asked myself: Why does management so frequently assume that we are just there to “find problems?” I even had managers look me in the eye and say, “I know you have to find something wrong to justify the audit.”…

February 15, 2021

It’s Hard for Internal Auditors to “Follow the Risks” When There Is No Consensus

One of the persistent challenges internal auditors face is finding alignment with stakeholders on the risks that most threaten their organizations. For many years, I have written about the importance of building relationships with those we work for and with to nurture communications that support alignment. Indeed, the most common advice I’ve offered to chief audit executives (CAEs) over the years is “know what is keeping our stakeholders up at night” and “follow the risks.”

A recently published report from Protiviti and the North Carolina State University ERM Initiative helps shed light on that alignment (or misalignment). Executive Perspectives on Top Risks: Key Issues Being Discussed in the Boardroom and C-suite (PDF) examines risks facing organizations in 2021 and beyond as seen by a wide variety of respondents, from board members to every position that makes up the C-suite, including CAEs.…

February 7, 2021

How Do You Answer, “What Do Internal Auditors Do?”

Shortly before the onset of the pandemic, my wife and I moved to a different part of Florida. Living in a new community can be rewarding because you meet new people and make new friends. As you get acquainted with others, the inevitable question arises: “What do you do for work?”

Obviously, I could say I am a CEO or an association executive. But I still instinctively (and proudly) proclaim that “I am an internal auditor!”

The first reaction is often a joke, such as “please don’t audit my taxes,” or “I’ll bet you are popular at work.” I can’t help but remember a live radio interview I did several years ago.…

January 31, 2021

I Still Believe Internal Audit Shouldn’t Report to the CFO

Readers of my blog know there are a few things I have harped on over the years. One of them is what I consider to be the outdated practice of having internal audit report administratively to the chief financial officer (CFO).

For years, The IIA has conducted research on internal audit reporting relationships. The good news is our surveys have found a consistently high percentage of chief audit executives (CAEs) who say they report functionally to the audit committee. In fact, more than 80% of North American CAEs surveyed for The IIA’s upcoming 2021 North American Pulse of Internal Auditreport say they report functionally to the “audit committee, board, or equivalent.”…

January 24, 2021

Using the New Global Risks Report to Be Risk Beacons in Our Organizations

Given the global mission of The IIA, I frequently share global studies that should be of interest to internal auditors around the world. These reports come frequently from organizations such as The World Bank, Organization for Economic Co-operation and Development, International Monetary Fund, and World Economic Forum (WEF).

All of those organizations generate valuable knowledge via thought leadership and other reports. However, in recent years, I have found WEF’s annual Global Risks Report to be particularly valuable. Those who attend my presentations at IIA conferences and other events may recall that I have used more than a decade of risk report data to illustrate the volatility of global risks in the 21^st century.…

January 19, 2021

Are Boards Negligent When Internal Audit Heads Are Hired and Fired?

Great internal audit functions are noted for their organizational independence, and the professional men and women who lead them are noted for their objectivity. It’s for these reasons that the establishment of separate functional and administrative reporting lines that foster that independence and impartiality is so critical.

As I first noted in a 2016 blog, I often observe that chief audit executives (CAEs) are less likely to be unduly influenced by management when they have a strong functional reporting relationship to the board or audit committee. Without such a relationship, it is very easy for management to confine the scope of internal audit’s work and to suppress unfavorable results.…

January 13, 2021

From the Epicenter of Corporate Governance, Internal Auditors See Modest Improvement

A great deal has been written about the impacts of COVID-19 from every imaginable angle, from workplace culture, talent management, and evolving business models, to changing social interactions and even fashion. Much of that writing is based on little more than observation and analysis.

Today, The IIA, in collaboration with the University of Tennessee’s Neel Corporate Governance Center, releases an authoritative examination of the pandemic’s impact on corporate governance that is based on solid survey data.

The American Corporate Governance Index, appropriately titled Making Strides Amid Crisis, finds that corporate governance improved modestly last year, despite the chaotic and challenging atmosphere created by the rapid spread of the deadly virus.…