Expanding role of internal audit increases need for specialty skills - Ernst & Young - Russia

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Expanding role of internal audit increases need for specialty skills

Organizations look to internal audit for business improvement, says Ernst & Young

NEW YORK, MOSCOW, 26 November 2008 — Internal Auditors face new opportunities and a growing skills gap as management increasingly looks to them for business improvement recommendations and coverage of a broader range of strategic and operational risks, according to the Ernst & Young 2008 Global Internal Audit Survey.

“Difficult economic conditions and heightened shareholder expectations have put pressure on executive management and audit committees to improve risk management and deliver greater value,” says Neil Aaron, Global Leader for Internal Audit at Ernst & Young. “As a result, internal audit’s role is clearly evolving and becoming more consultative. Regulatory compliance continues to be important, but management now expects performance improvement recommendations and insights into emerging risks, in addition to coverage of a much broader range of risks.”

The survey of 348 internal audit executives in 35 countries shows a need for greater focus on operational risks over next two years, with 75% of respondents citing focus on IT, 61% on mergers and acquisitions, 53% on major capital programs, 45% on performance improvement, 44% on information security, and 39% on fraud.

Yet, only 69% of respondents are at or above 90% of budgeted headcount with 64% indicating that recruiting and retaining subject matter specialists in these areas is a challenge.

Aaron continues, “Internal audit’s traditional competencies don’t fully meet the needs of today’s organizations. This lack of resources with relevant experience and knowledge hinders the ability to conduct an effective risk assessment. Only 17% of respondents rated their risk assessment performance as “very competent.”

Re-tooling and Rotating

Eighty-three per cent of respondents are looking outside of their organization to third-party providers to address the gap in specialist skills. Developing the competencies of existing employees is an opportunity that is going unexplored by many.

Lack of time dedicated to training efforts is the key impediment to skills development according to 55% of respondents. While 71% of respondents have no formal program to rotate business professionals through internal audit and into the business.

“The transition from financial reporting compliance skills to operational, technical and other specialized skills can be achieved from within the business itself,” says Aaron. “Retooling existing resources or rotating personnel from within the business requires time investments and formal programs, but can offer some longer term benefits to the whole organization with increasingly transferable skills across the business.”

“One could say that Russian companies have the biggest potential for dynamic development of the internal audit function, as this function is often only in the creation stage and there is no need to break with old traditions. In addition, Russian companies can learn from their foreign counterparts and make use of the experience of consultants” - said Elena Egorova, Ernst & Young Senior Manager, Head of Internal Audit department.

About the survey

Ernst & Young Internal Audit survey 2008 interviewed 348 companies consisting predominately of large public companies, across 23 industries in 35 countries. Twenty-five percent of the respondents are members of the Fortune Global 500, and 49% are members of the Forbes Global 2000.

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young expands its services and resources in accordance with clients’ needs throughout the CIS. Over 3,900 professionals work at 15 offices throughout the CIS in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Togliatti, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, and Minsk.

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