| PwC’s 2012 State of the Internal Audit Profession Study has revealed that global economic uncertainty is the biggest risk facing companies in 2012, according to almost three-quarters of the 1530 chief audit executives and stakeholders, including audit committee chairs, polled.
Businesses are calling for internal auditors to broaden and deepen their role in helping them navigate the rapidly changing risk landscape across a range of risks, including data privacy and security, and regulation and government policies.
“As the risk landscape continually evolves and more is expected from the internal audit function, the majority of business leaders surveyed said they are not comfortable with how their risks are being managed, although 74% of those surveyed have formal enterprise risk management processes,” said Jim Woods, PwC China and Hong Kong Risk & Controls leader.
Mr Woods said that to deliver what stakeholders want, it’s clear the standard for an effective internal audit function has been raised, making it essential for the function to elevate its performance.“Businesses must evaluate their total enterprise risk, coordinate with the internal audit function and break down organisational barriers to provide a holistic approach to risk management,” he said.
Successful internal audit functions create plans through comprehensive, top-down risk assessments where the entire enterprise risk management process is taken into consideration. According to the survey results, 45% of organisations still do not create their audit plans using a robust, top-down risk assessment approach.
A majority of respondents identified organisational and cultural resistance as the most common barriers to internal audit’s ability to step up and meet stakeholders’ increasing demands, followed closely by lack of internal audit resources and expertise.
Mr Woods believes that here in Hong Kong and China, as more stakeholders seek an objective point of view to more effectively manage global risks, internal audit groups are now turning to external expert providers as a move to better help them respond to a growing range of risks.
The report adds that internal audit groups at leading companies provide stakeholders with advice on how to improve risks and controls rather than just reporting on gaps. 78% of the survey respondents whose companies were better at managing risk say their chief audit executives have an active role in the executive meetings. In addition, they take into consideration the organisation’s enterprise risk management process and they adapt their approach quickly when changes are needed.
As John Feely, PwC's Global Internal Audit Services Leader, comments: “To add to stakeholder confidence and be seen as a vital, contributing business partner, internal audit must do much more than financial controls and compliance – it needs to provide assurance across a broader range of business risks, provide deep insights and business perspectives and be able to present to stakeholders in a way that cuts through the clutter.”
John adds: "Our survey confirms that Boards and Audit Committees expect more from internal audit. They want internal audit to act as their eyes and ears and provide essential comfort that critical business risks are being well managed. But while internal audit clearly matters, the challenge for the chief audit executive is to find a way to consistently deliver on these increasing expectations.”
To download a full copy of the report,"PwC 2012 State of the Internal Audit Profession Study" please visit www.pwc.com/us/2012internalauditstudy.
The 2012 State of the Internal Audit Profession survey was conducted in the fourth quarter of 2011 and the first quarter of 2012 and includes more than 1,530 respondents in 16 separate industry sectors from 64 countries across the globe. This year, for the first time, in addition to surveying internal auditors about the state or the profession, PwC surveyed the profession from the outside in, asking CFOs, audit committee directors, CEOs, and other stakeholders to share their views on internal audit’s role in the organisation and its capabilities for supporting therisk management activities of the company.
More than 660 non-internal audit stakeholdersshared their points of view through participation in the 2012 State ofthe Internal Audit Profession survey in addition to approximately 870 ChiefAudit Executives across the globe. In addition, nearly 100 CAEs and stakeholdersparticipated in one-on-one interviews, enabling PwC for the first timeto share a comprehensive outside-in look at the profession.