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Culture Poses High Risk, Financial Services Poll Finds

Fewer than 1 in 10 firms report designing audits for culture

ALTAMONTE SPRINGS, Fla. (Oct. 20, 2015) — More than half of internal audit professionals in the financial services sector consider corporate culture a big risk in their organizations, but less than 10 percent have programs dedicated specifically to auditing culture, according to a new survey by The Institute of Internal Auditors (IIA) Financial Services Audit Center (FSAC).

This insider’s glimpse is especially intriguing in light of a number of recent cases across industries, from Toshiba and Hertz to FIFA, in which a toxic culture contributed to scandal. Punctuating the survey’s findings, half of the more than 400 respondents reported that organizational culture is not routinely audited.

“This survey tells us, at this point in time, there is quite a bit of work to be done,” said IIA President and CEO Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA.

The FSAC Quick Poll found that 56 percent of respondents, from chief audit executives to partners, consider culture a high risk for the organization. Concern was higher among directors and senior managers, with 62 percent considering culture a high risk. Assessing of culture is embedded in existing audit programs for 37 percent of respondents overall, but only 7 percent reported having specific audit programs focused on organizational culture.

The survey results reflect the views of internal auditors primarily from North American financial services organizations, which make up the majority of FSAC membership.

The survey’s findings should raise a red flag about the current attitude toward culture as a risk and internal audit’s role in providing assurance and oversight for that aspect of business, Chambers said.

“This survey is eye-opening in that professionals at all levels of internal audit, from CAEs to outside consultants, identify culture as high risk for their organizations,” Chambers said. “Yet, there are so few dedicated programs in place to audit organizational culture.”

While the financial services industry has come under intense regulatory scrutiny since the passage of Sarbanes-Oxley and Dodd-Frank, most of that oversight has focused on standards and compliance, not culture, Chambers said, adding that regulators outside of the United States have placed more emphasis on corporate culture in financial services.

About FSAC

Established in June 2015, the Financial Services Audit Center supports audit professionals in the banking, investments, and insurance sectors through thought leadership, education, professional guidance, and advocacy.

Within this heavily regulated industry, auditors face unique and complicated challenges to mitigate the risks facing their organizations and their clients. FSAC represents The Institute of Internal Auditors’ commitment to the industry by offering unique and meaningful content to service the needs of the industry.