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As the decade comes to a close, the media seems to be awash with reports reflecting on 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 internal auditing; however, I’ve compiled my list of the five events that defined the decade for internal auditors.
- Adoption of the Professional Practices Framework (2002): After years of deliberation, careful crafting, and exposure for comments, The IIA issued the revised Standards for the Professional Practice of Internal Auditing (Standards) as part of the newly minted Professional Practices Framework in late 2001 — which are now both deemed as “International.” The new Standards (which were effective on Jan. 1, 2002) represented a significant milestone for the profession. Of particular note were the new requirements for quality assurance and improvement programs, and risk-based internal audit planning. The Standards were continuously revised and updated throughout the decade. However, the most significant changes occurred in the initial launch in January 2002.
- Financial Fraud and the Ensuing Corporate Failures (2002): Within weeks of the launch of the Professional Practices Framework came a series of events that would significantly alter the internal audit landscape for the decade ahead. First came Enron, then WorldCom, and then an endless list of companies whose executives had seemingly lost their moral compass. The scopes of the financial frauds were breathtaking and resulted in some of the largest corporate bankruptcies in history. Although the frauds themselves did not directly impact internal auditors, they created a regulatory and statutory reform (PDF) environment that substantially altered the focus of internal auditing (particularly in North America) and elevated its stature for the decade ahead.
- Cynthia Cooper Named a Time Magazine “Person of the Year” (2002): When Cynthia Cooper was named one of Time‘s “Persons of the Year,” in its Dec. 30, 2002, edition, it marked an extraordinary milestone for our profession. As I commented in this blog post last August, Cynthia’s “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.”
- Release of The PCAOB’s Auditing Standard No. 2 (PDF) (2004): Although eventually superseded by Auditing Standard No. 5, this U.S. Public Company Accounting Oversight Board (PCAOB) standard offered a very strong endorsement of internal auditing as a source of reliance by external auditors performing an audit of internal control over financial reporting. Specifically, the PCAOB stated: “Internal auditors normally are expected to have greater competence with regard to internal control over financial reporting and objectivity than other company personnel. Therefore, the auditor may be able to use their work to a greater extent than the work of other company personnel. This is particularly true in the case of internal auditors who follow the International Standards for the Professional Practice of Internal Auditing issued by The Institute of Internal Auditors.” I can tell you as one who was on The IIA staff at that time, our source of pride over this recognition was unsurpassed.
- Global Economic Crisis (2008-2009): Following years of strong performance, the global economy was suddenly and dramatically impacted during 2008 by a global economic crisis unparalleled in the last 70 years. The economic crisis presented new risks and challenges for organizations in every sector and for the internal auditors that served them. Although the fallout from the crisis is still being felt, the profession has acquitted itself remarkably thus far. And as I observed in this blog post last March, “the profession has much to be proud of when it comes to demonstrating its agility and versatility in the face of a dynamically changing environment.”
The past decade has been characterized by some amazing milestones for our profession. Who knows what surprises lay ahead in the coming decade. I have some thoughts on this that I look forward to sharing in the new year. In the meantime, please feel free to offer your own defining events of the past decade so that we can all reflect on our common professional experience.