The Global Practice of

Internal Auditing
As Business Officers:
whats in it for you?
BrianG.BrownCIA,CMA,CFE
DirectorCorporateServices,AgricoreUnited(Winnipeg)
CanadianRepresentativeonIIAGlobalBoardofDirectors
andNorthAmericanBoard,ChairCanadianAdvocacyTaskForce

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Agenda
Whats going on around the world?
What is this profession that everyone is
talking about?
What can internal auditing do for you?
Whats happening in the public sector?
What is the new Academic Relations
strategy?
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It is a great time to be an
internal auditor
globallyand,particularly,in
Canada!!

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Internal Auditor
named a
Person of the Year

Last June, Cooper told the audit committee of

WorldCom's board that the company had been playing
dirty with its accounting practices.
Time Magazine
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Global Developments

Founding member of COSO

Contributor to King Report in South Africa
Ongoing communication with SEC/PCAOB
IFAC & INTOSAI alliances
Memorandum of agreement with ACCA
Junior Achievement

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Global Developments
IIA Australia is an active member of the Australian Stock
Exchanges Corporate Governance Council.
IIA-Chinese Taiwan has been designated by the SEC as a
provider of governance education.
IIA-France was appointed by the French SEC to be the lead
writer of the French control framework.
IIA Philippines developed the SEC Circular for the Code of
Corporate Governance. The code, approved by the SEC,
contains various provisions regarding the importance of
internal auditing and the vital role of the CAE.
IIA South Africa was a major coordinator and developer of the
King Report on Corporate Governance.
The IIA has also commented on exposure drafts from the
Basel Committee and the OECD (Organization for Economic
Cooperation and Development.)

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Canadian Government
Policy on Internal Audit
October 2005
Entrenches Internal Audit into the Governance
Structure of the Government

Additional $30 million funding

200 300 additional IA staff
Certification, professional development
Independent Audit Committees
Reporting relationships
Comptroller-General supervision
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Quotes
Internal audit is the primary resource of the
audit committee in carrying out its duties and
responsibilities. With those responsibilities
increasing and continued pressure from the
SEC for financial reporting integrity, a
functioning partnership of the audit committee
and internal audit is vital.
-BellSouth Corporation

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Quotes
An active and informed audit committee
provides the ultimate independent and
objective oversight of the corporate control
environment, including focus on emerging
trends and risks. Internal auditing is the
primary agent of the audit committee within
the company.
- Ford Motor Company

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From the Media

Internal Auditors are no longer stuck in the
financial compliance box, havingevolved into
a more business-oriented role.
Few careers (sic) are more sought-after than
internal auditors
Internal auditors are rock stars now, this is
their day in the sun.
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The Institute of Internal

Auditors (IIA)
Global Membership:
1990 39,000
2001 74,000
April 2005 100,000
June 2006 123,000
(160 countries)
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The Institute of Internal

Auditors (IIA)
Global Membership:
1990 39,000

Canadian Membership:

2001 74,000

2003 3,800

April 2005 100,000

April 2005 4,700

June 2006 123,000

(160 countries)

June 2006 5,400

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IIA Membership Educational Services

2300 Global Members (101 in Canada) 80
countries
453 Educators (20 in Canada) 20 countries
1033 Student Members (18 in Canada) 7
countries

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Certification Statistics
(Global)

2001 35,732 Certified Internal Auditors (CIA)

March 2006 57,339 CIAs

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Job Situation
Internal Auditors are one of the most sought-after
professions globally
Demand is currently far exceeding supply
Within Canada, particular challenges in Montreal, Ottawa,
Toronto, and Calgary
April/May 2006 Canadian statistics:
Monster.ca: 75 - 100 job opportunities weekly
Workopolis: 170 200 job opportunities weekly

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The IIA in Canada

Major Change in Profile

Recent Announcement:
Establish a Canadian Council (volunteer
oversight body)
Hire an Executive Director
Open an IIA Canada office
Target: July 2006

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Advocacy in Canada

Significant events in the last 18 months

Canadian Federal Government Internal Audit initiative
Securities Commissions (OSC, AMF, BCSC) meetings,
correspondence
The Directors College IA on education program
Institute of Corporate Directors National, Chapter
relationships
CICA Audit Committee Conference (September 2005)
Certified Management Accountants (CMA) projects
Certified General Accountants (CGA) discussions
Several chapters initiate coordination with local
universities
Speaker at CFO Summit (March 2006)
Meeting with Canadian leaders of ACCA, initiate chapter
relationships
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Two current global programs

under development:
1.

Government initiative improve support

services for government auditors, quasigovernment (World Bank, UN), and other
public institutions

2.

Academic Relations initiative improve postsecondary education for students of internal

auditing through direct relationships with
universities around the world

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What is this profession

that everyone is talking
about?

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What is Internal Auditing?

Internal auditing is an independent, objective
assurance and consulting activity designed to add
value and improve an organizations operations.
operations
It helps an organization accomplish its objectives
by bringing a systematic, disciplined approach to
evaluate and improve the effectiveness of risk
management, control, and governance
processes.
processes
AdoptedJan/01

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Basis for the Profession

Standards for the
Professional Practice of
Internal Auditing
Code of Ethics
Certified Internal Auditor
Designation

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Internal Audit Charter

Sample:

Establishedto improve corporate activities as a

service to the organization and its shareholders
To assist the Board and Management by
bringing a systematic, disciplined approach to
evaluate and improve the effectiveness of
control, risk management, and governance
processes
Independent, objective assurance and consulting
activity

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Internal Audit Charter

Sample:

Reporting relationships defined to provide

independence and support
Full, free, and unrestricted access
Recommendations to improve activities
Outline internal audits responsibilities
Management responsibilities (operations,
training, controls, policies, etc)
Compliance with IIA Standards
Signed by CEO, CFO, Audit Comm. Chair,
Chairman of the Board

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Internal Audit Focus

Internal audit is focused on internal controls that
assist the whole organization in achieving its
objectives;
Controls that affect the quality and accuracy of the
published financial statements usually represent
only a small portion of the internal audit scope;

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What can internal audit

do for you?

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Critical Success Factors

(from a board/organization perspective)

1.

Hire a top-notch Chief Auditor

-

2.

Experienced (in internal audit), qualified,

competent, charisma, courage, management
style, leadership, etc

Give Internal Audit something to do

-

Scope, budget, support, profile, a seat at the

table, listen to them

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Internal Audit - Preferred Reporting

Structure
Functionally to Audit Committee
(2005 75%, 2002 55%)
B o a rd o f
D ir e c t o r s
C h ie f E x e c u t iv e
O f f ic e r
C F O

IT

H R

A u d it
C o m m it t e e
O p e r a t in g
D iv is io n s

O th e r
C o m m it t e e s

In te rn a l
A u d it

Administratively to
most senior executive (eg CEO)
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Independence

structural guaranteed by reporting

relationship with Audit Committee

Organizational
Reporting relationship
Ability to talk to the right people
Say what needs to be said to the person
who needs to hear it
Access to senior management & board
Functional
Not Responsible for audit area

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Objectivity - frame of mind

Relies upon the professionalism
of the internal auditor

No bias
Not influenced by others
Open
Say what needs to be said
Perspective
Balance
Tone

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Staffing internal audit.

isnt it just accounting?
Risk Manager

CGA

Trainer

CA

Credit
Lawyer

Real Estate
Computer Security Expert

CMA

Financial Analyst

Fraud Examiner
Programmer
Engineer
Retail

Banker

Operations

Geologist
Human Resources
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What do Internal Auditors

Do?
Assess and provide assurance regarding the
quality of internal controls, risk
management, and governance processes
Audits of a variety of form and style
Analyses, research, discussion
I.T. performance, security assessments
Reporting to managers/executives
Help improve the effectiveness and
efficiency of processes and operations
Investigate fraud situations
Provide a resource for skills (be careful)
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Two clients..different
but overlapping services
Audit Committee
Assurance regarding
internal controls &
risk management
Identification of
material issues
Assistance with
governance matters

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Two clients..different
but overlapping services
Audit Committee

Management

Assurance regarding
internal controls &
risk management
Identification of
material issues
Assistance with
governance matters

Feedback on
operations
Recommendations to
improve controls,
processes, systems
Participation in major
projects

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Why is Internal Audit able to

effectively provide these services?

Skills and experience plus independent

reporting structure, objective frame of
mind.combined with in depth knowledge:
business
With enough
organization
resources and
people
scope, this
combination is
systems
powerful!
control environment

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Roles in current
governance activities

Project audits
Control Environment (tone at the top)
Ethics/fraud awareness
Information technology controls
Assist/review financial controls documentation
Advise on financial control testing (managements)
Help the board/senior management understand new
regulations/guidance in the context of your
organization
Help the audit committee understand and fulfill its
role
And.

Maintain a balanced scope of audits

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Assessing your
internal audit services

Competence/qualifications of Chief Auditor

Scope of work, resources available ($$, people, skills)
Knowledge organization, industry, issues, etc
Identification of significant issues
Respect within the organization
Healthy tension with senior management
Healthy tension with external auditor
Reliable assurance - minimal surprises after audits
Quality Assessment reviews
Response to audit committee requests

Get to know your Internal Audit staff.

.they are your eyes and ears
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Whats happening in the

public sector?

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Canadian Government

Rivals the most innovative

public-sector practices worldwide
New Audit Policy Entrenches Internal Audit into the
Governance Structure of the Government

Additional $30 million funding

200 300 additional IA staff
Creation of Chief Audit Executive in each dept/agency
Independent reporting relationships
Certification, IIA Standards
Ongoing professional development
Best-practice audit methodologies
Independent Audit Committees
Comptroller-General supervision
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New/Expanded services for

government auditors
Annual government auditors conference
Focused training at lower cost in more convenient
locations
Government audit resources available
Quarterly newsletter
Development of position papers
Increased role for government auditors in IIA
leadership, including financial assistance if
required
Advocacy efforts
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What is the new Academic

Relations strategy?

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Current Situation
No Canadian university offers an Internal Audit
education program
- generally, brief coverage under other forms of audit

Primary and Secondary School programs contain

no introduction to internal auditing
Demand for internal auditors is growing
(including university graduates)
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Current Situation
Outside Canada

Currently 30 schools participating in Internal

Audit Education Partnership program (USA,
South Africa, England, France, etc)
Examples: LSU 150 grads/year, U of Pretoria
(SA) 100 grads/year
Employers looking for more

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Academic Relations Strategy

Rolling out in 2006

Internal Audit Education Partnership (Global)

Three levels of participation
Curriculum built around CIA CBOK
IIA to supply education resources
Coordination of symposia, summits, colloquia
by the IIA
Funding support
Quality Assurance

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Academic Relations Strategy

To Participate:
Hire an Internal Audit educator
Hire grad/teaching assistants
Promote Internal Audit program
Create new education material
Enhance student involvement in IIA
chapters/affiliates

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IAEP Benefits
For Schools:
Meet growing demand
Eminence opportunity
Research opportunities
Sponsorship
Flexible Internal Audit Curriculum

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IAEP Benefits
For Students:
Employment opportunities
Internship opportunities
Research opportunities
Quality education in topical area

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Final Thoughts.

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FourPillarsofGoodGovernance
BoardofDirectors
SeniorManagement
ExternalAuditors
InternalAuditors

Eachindependent,knowledgeable,
competent,trustworthy,forthright;
Stronginteraction(teamwork,
communication)betweeneach;
Commonobjectives.
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Questions?
Comments?

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