NEW YORK, March 16, 2009 (GLOBE NEWSWIRE) -- A difficult period sets the stage for internal audit transformation according to the 2009 PricewaterhouseCoopers LLP (PwC) State of the Internal Audit Profession study. Not surprisingly, the economy is the top issue for the coming year, according to PwC's fifth annual study of current issues for the internal audit profession. While the economy dominates, other issues such as increased globalization, alignment to emerging risks, and declining budgets are also top of mind. Now is the time that internal audit leaders must be laser focused on the value and quality of service their departments deliver to their organization.
"Internal audit department leaders are facing unprecedented challenges and many are hard pressed to maintain coverage at a lower cost," said Jim LaTorre, partner and U.S. internal audit services leader for PwC. "Yet among the challenges are opportunities to raise the bar and find creative and cost-effective solutions to transform the internal audit function and bring increased value to the organization and its stakeholders."
Forty-nine percent of respondents expect budgets to remain flat, and 36 percent expect a decrease in the coming year. In addition, 51 percent of Fortune 500 survey respondents believe that there is a medium-to-high risk of the economic downturn causing an unexpected reduction in the internal audit budget during 2009. That said, the expected reduction in budget is sure to present additional challenges to internal audit departments.
Another topic brought into focus in the 2009 study is the need for internal audit departments to rethink learning and staffing strategies. The study found that 58 percent of respondents' staff have five years or less of experience.
As the current economic downturn reveals, shareholder value is being battered by new and previously unanticipated risks. Internal audit now, more then ever before, faces the dual challenge of realigning its resources to address the reality of these new emerging risks while demonstrating knowledge of the business with staff that are less experienced and potentially unprepared to identify and deal with the implications of those risks.
"We believe that it is imperative that internal audit leaders find effective ways to attract and retain top talent and increase business and operational knowledge among the ranks," added Gary Chamblee, co-author of the study and internal audit services partner with PwC.
The 2009 study also found that the nature of business risk has drastically changed, particularly for global organizations. PwC believes that successful internal audit departments will be those that maintain alignment with the changing risk profile of their company and the evolving needs and expectations of their key stakeholders.
Many internal audit functions are still heavily focused around auditing financial reporting and compliance controls, hallmarks of the initial years of Sarbanes-Oxley, according to the study. Only 13 percent of respondents indicated their departments allocated at least 25 percent of resources to strategic and business risks, while a clear majority (57 percent) assigned this degree of resource to more traditional financial risk.
"Business and operational risk categories are the areas of highest risk, however internal audit departments are not focusing on these issues," stated Peggy Hardek, co-author of the study and internal audit services partner with PwC. "Determining the composition of auditing activities is certainly one of the most significant challenges internal auditors will face."
Other topics discussed in the 2009 study include:
* ERP Implementations highlight a skills gap -- Internal audit needs to get up to speed in ERP systems and data analytics. * When governance meets continuous improvement -- Internal audit is presented with performance measurement and customer-centric feedback. * New strategies for success in a time of transition -- Drivers of \ internal audit success have changed in response to dramatically changing business conditions.
"Faced with volatile risks and declining resources, internal audit leaders will be challenged in 2009 to embrace creative solutions for ensuring risk monitoring and mitigation while implementing cost-saving initiatives," said LaTorre. "However, this economy offers us a unique opportunity to reassert the value internal audit is capable of delivering beyond the compliance requirements of Sarbanes-Oxley."
To download a full copy of the report, "Business upheaval: Internal audit weighs its role amid the recession and evolving enterprise risks: PricewaterhouseCoopers 2009 State of the internal audit profession study," please visit www.pwc.com/internalaudit.
METHODOLOGY:
The 2009 State of the Profession survey for internal auditing was conducted in the fourth quarter of 2008 and includes responses from 700 internal auditors.
Of the respondents, 88 percent are either chief audit executives or internal audit directors/managers, and 69 percent are from companies with $1 billion or more in revenue.
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