Study Reveals Global Opportunity for Enhanced Organizational Ethics
Thriving internal audit profession can do more to strengthen tone at the top
Global results of the Pulse of the Profession survey, an annual assessment of the state of the internal audit profession around the world, has been published by The IIA. As the survey’s title — 2013: Time to Seize the Opportunity — suggests, the time for internal auditors to seize the opportunity is now — especially in regard to organizational ethics, staffing and budget resources, and the stature of the internal audit function.
The IIA has long strongly supported the importance of the internal auditors’ role in advocating for and advancing an ethical tone at the top. According to IIA President and CEO Richard Chambers, CIA, CRMA, CGAP, CCSA, “The IIA will leverage the results of this global report as a catalyst to help ensure that chief audit executives (CAEs) all around the world become more visible and increasingly more effective in that role.”
Although a substantial 88 percent report their organizations have a formal code of ethics or code of conduct, 18 percent of the chief audit executive (CAE) respondents believe their organization’s ethics/conduct code and value statement do not fully reflect the tone at the top. In North America, the Asia-Pacific region, and Latin America, the percentages of CAE respondents who perceive a gap between their organization’s written ethics aspirations and executive behavior are 13 percent, 14 percent, and 16 percent, respectively. But in Europe and Africa, the corresponding percentages are a higher 20 percent and 26 percent, respectively.
The report suggests that the CAE has an obligation to the organization that is far beyond writing adverse findings on misconduct. Instead, states the report, CAEs must get involved where ethics are concerned and become vocal participants in rectifying areas that are not in keeping with their organization’s values. They must be willing to speak up. The reports says CAEs should assist senior management, the audit committee, and the full board with setting a strong tone from the top, implementing frequent and effective employee training, and ensuring organization-wide adherence to a code of ethics and value statement.
Summarily, the role of the CAE in these efforts is “to be an integral part of the conscience of the organization,” says Doug Anderson, vice chair/professional practices of The IIA’s Global Board of Directors and finance director at the multinational company Dow Chemical in Midland, Mich. “CAEs cannot be bystanders where their organization’s ethics are concerned. They have to be active players.”
According to the report, soft skills — namely, analytical and critical thinking and effective communications — are recognized all around the world as the most coveted attributes internal auditors can bring to the activity. “Internal auditors add the most value when they can see the big picture and are equipped to effectively articulate their unique perspective to stakeholders,” says Chambers.
“Internal auditors have strengthened their role as top executives within a company. Nowadays, no one doubts that technical skills are not enough for executives,” says Javier Faleato, CEO of IIA‒Spain. “To act as facilitator among different assurance functions, internal auditors need expertise in different areas such as communication and negotiation, among others.”
Furthermore, soft skills are seen as essential to closing the expectation gap. As noted by Farid Aractingi, vice president of Audit, Risk and Organisation at Renault, Chairman of Renault Consulting, president of the IIA‒France/IFACI, "In the current global economic climate, auditors should envision their role as a business partner. They need to act as facilitators between the various stakeholders: auditees, managers, the C-suite and the audit committee."
Other results of the survey reflect many advances in the profession throughout the world, including appropriate reporting relationships, adequate resource allocation, and internal audit’s increasing role in assuring risks to their organization’s strategic objectives are addressed.
- A substantial majority of chief audit executives (CAEs) report functionally to the full board or its audit committee, especially in North America and Africa. (This practice is least common in Latin America.)
- A majority of CAEs from Latin America, Europe, Africa, and the Asia-Pacific region report administratively to the CEO. (Only about one-third of CAEs in North America report to their organization’s top-ranking executive, and more than a third report to the CFO.)
- Many CAEs worldwide had more staff and budgetary resources at their disposal in 2013 than in any other year since the financial crisis.
- On a worldwide basis, audits primarily apply to operational efficiency and effectiveness, information technology, and regulatory compliance; with increasing focus on strategic risks and risk management assurance (especially in Latin America, Europe, and the Asia-Pacific region).
“Business, compliance, and regulatory risks continue to be the top priorities in many audit plans in Latin America,” says Ana Cristina Zambrano Preciado, president and CEO of IIA‒Colombia. “Consequently, internal audit should expand its focus on more value-added strategic efforts, which, in turn, will help us obtain a better understanding of the risk landscape in our organizations prior to providing assurance.”
A record 1,700 internal auditors from 111 counties participated in The IIA Audit Executive Center’s 2013 global Pulse of the Profession survey. Sixty-three percent of those respondents are the most senior audit executive at their organization with ultimate responsibility for ― and the most knowledge about ― the entire internal audit function. Therefore, this report is based on the responses of these chief audit executives, who hail from organizations that vary widely in location, type, size, and industry sector.
Download the global report