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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, KYIV, 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."
Roman Tatarsky, Head of Business Risk Services with Ernst & Young Ukraine adds, "Particularly in young economies, such as Ukraine’s, the need for process optimisation, redesign and reviews of efficiency and effectiveness are critical and even profitable as businesses continue to evolve and mature. Due to their broad exposure to an organisation’s activities, Internal Audit professionals are uniquely positioned to provide an on-going, independent risk analysis of the business, share leading practices, optimise and streamline business processes across various areas of a business and facilitate positive change. We view ‘risk’ as any factor that may limit a company’s ability to execute on its business strategy and, as such, Internal Audit is often one of the greatest untapped consulting resources within an organisation. Especially in this period of acute attention to operational and financial performance, Internal Audit is one of Management’s best sources of independent advice and critical feedback on company performance."
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."
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 130,000 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 potential.
In Ukraine Ernst & Young established its practice in 1991. Ernst & Young Ukraine now employs more than 570 professionals providing a full range of services to a number of multinational corporations and Ukrainian enterprises. For more information, please visit ey.com/ukraine.
