Internal audit departments anticipate more focus on compliance risks and less emphasis on Sarbanes-Oxley, according to a new survey.
The latest Pulse of the Profession survey, a semi-annual assessment of the state of the internal audit profession in North America, released Thursday by The Institute of Internal Auditors’ Audit Executive Center details how internal auditors foresee risks of the Affordable Care Act and preparation for the COSO 2013 Internal Control-Framework Implementation in the coming year.
“We are seeing a stronger trend toward internal audit focusing on areas other than financial controls,” said IIA president and CEO Richard Chambers in a statement. “Risks themselves are diversifying and are not concentrated in one single area as there may have been in years past.”
According to the survey respondents, operational audits make up the most prevalent type of 2014 audit coverage (27 percent), with compliance audits coming in second (15 percent).
General financial, SOX, and IT audits each represent 11 percent of audit coverage. In addition, the survey respondents indicated that compliance is among the top five risks for both the audit committee and executive management.
With many of the requirements of the Affordable Care Act taking effect this year, health care is an area where internal audit may see an increased focus on compliance in 2014, according to the IIA.
“One of the greatest opportunities facing the profession this coming year relates to the U.S. Affordable Care Act,” said Chambers. “To take advantage of this opportunity, internal audit cannot assume a reactive posture. This regulation challenges internal audit to become a visionary, proactive function in their organization.”
The report found a potential expectation gap emerging in internal audit’s ability to help stakeholders understand the risks associated with the Affordable Care Act and their organization’s preparedness to mitigate those risks. With relation to the impact on their organization and internal audit, 22 percent of the survey respondents said they are unsure whether the 2014 requirements of the Affordable Care Act will affect their organization and 18 percent are unsure of the impact on their internal audit department. Among the participants who noted that the Affordable Care Act would apply to their organization, 38 percent rated themselves as not very knowledgeable about the law.
Among those respondents who said the legislation would apply to them, 17 percent agreed that their organization would likely act to mitigate the ACA’s risks by reducing or dropping health care benefits in the next one to three years.
“Today’s legislative headlines are likely to become tomorrow’s compliance risks,” said Chambers. “Being cognizant of the effects of regulatory activity allows internal audit to demonstrate foresight when it comes to compliance risk.”
Respondents to questions about COSO 2013 implementation indicated that internal audit departments that are implementing the revised framework by Dec. 2014 anticipate an easy transition. More respondents are looking to adopt or transition to COSO 2013 (87 percent) than previously used the 1992 COSO framework (73 percent).
In addition, the Pulse of the Profession survey indicated that the outlook for internal audit resources in 2014 remains strong, with resource levels stabilizing close to pre-recession levels.
Thirty-six percent of the survey respondents indicated that their budgets would increase in 2014 and 54 percent stated budgets will remain stable next year. Twenty-five percent of the survey participants anticipate staff levels to increase in 2014 and 72 percent expect them to remain stable, while only 4 percent expect staff levels to decrease next year—a more positive outlook than what had been anticipated in 2013.
“Over the years, the internal audit profession has adapted to the challenges of an ever-changing business environment and looking toward 2014, we are well positioned as a profession to tackle the obstacles before us,” said Chambers. “There are still a lot of drivers asleep at the wheel and the time is now to get up to speed as real risks manifest themselves.”
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