Internal auditors facing greater expectations

Focusing solely on compliance no longer enough says new Ernst & Young survey

New York, 11 October 2007 — Financial reporting compliance demands have dominated the work of internal auditors in recent years. But increasingly, internal auditors are also being asked to cover a much broader range of risks — including those related to fraud, major programs, contracts and transactions — as well as improve their companies’ overall business performance. These are among the main findings of Ernst & Young’s global internal audit survey, released today by the professional services provider.

The survey of 138 internal audit executives in 24 countries also shows that by taking on increased responsibilities internal audit teams are being stretched further than ever. Finding people with the right specialist skills to help meet evolving and emerging risks is the biggest challenge facing internal audit leaders. IT, fraud, and business and operational risk are the specialized skills most difficult to recruit and retain. These are also among the areas that respondents indicated pose the greatest risks to their companies.

More than one-third of respondents said that they didn’t have staff trained in fraud prevention and detection. Other skills gaps cited include transactions and tax.

The survey results also indicate that it will require significant retooling for internal audit teams to expand core skill sets in financial reporting compliance to include business/operational risk competencies, and to meet growing stakeholder expectations that internal audit add more value to the business.

“Internal audit is in the middle of an evolutionary transition,” explained Inge Boets, Global Business Risk Services Leader at Ernst & Young. “For a long time companies have looked to their internal auditors to keep them out of trouble. Now, companies also expect internal auditors to help improve their business performance. That represents not only a new set of challenges, but also a new set of opportunities.

“The internal audit teams that will make the most of these opportunities are those that can improve their companies’ performance in enterprise risk — specifically areas such as fraud, major capital programs, contracts, transactions, and international expansion,” Boets concluded.

Other key findings include:

• International coverage is a major challenge for companies in the global marketplace as they face issues relating to language and culture, local laws and regulations, and increased costs.
• In implementing enterprise wide risk assessments, as well as coverage of key risk areas, there is an opportunity for internal audit to improve coordination with other risk management groups within the company.
• Audit committees and executive management increasingly expect that internal auditors discuss not only the risks covered in the audit plan, but also risks not covered by the audit plan.

About the report
To compile its global internal audit survey, Ernst & Young spoke to internal audit executives from 138 companies across 24 countries. Most participants’ companies were multinationals with more than US$4 billion yearly revenue.

About Ernst & Young
Ernst & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 114,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited does not provide services to clients.

This press release has been issued by EYGM Limited, a member of the global Ernst & Young organization.