More Women Supervising Internal Audit Departments

The internal audit profession is seeing a bit of a gender shift, as more women become chief audit executives.

The global consulting firm Protiviti recently released an update of its annual book, “Internal Auditing Around the World.” The series typically features interviews with chief audit executives at companies across the globe. This year, for the 12th edition, Protiviti interviewed 22 leaders of auditing departments about the impact of technology on their organizations, and all of them are female. Protiviti highlighted the new book at the Institute of Internal Auditors’ global conference this week in New York (see Institute of Internal Auditors Kicks Off Conference).

“We update it every year,” said Chris Wright, managing director of Protiviti’s Finance Remediation and Reporting Compliance group. “It is a series of vignettes about chief audit executives talking about what they do well and their experiences from around the world. In this particular publication, it was all women CAEs. The common theme running through it, other than that, is that most of them were also talking about either technology as the thing they’re auditing, or the tool they’re using to audit.”

The internal audit profession isn’t necessarily moving any faster than the rest of the business world in opening up more roles for women. Protiviti decided to focus the guide this year on female audit leaders because it managed to gather more case studies about them.

“I don’t know that it’s a pattern that’s emerging in internal audit any differently than anywhere else,” said Wright. “Needless to say, in the business environment globally, that is a trend across all industries and service lines broadly. We decided to make it an area of focus this year because of the way we objectively gathered some of the best case studies we could and saw the trends this year being one where perhaps we could focus in on that as well. Clearly every diversity and inclusion report you see where folks are being audited for that, either internally or externally or by the investor groups, there is an interest and a need to see more companies look like the markets they serve. Whatever kind of diversity that implies, whether it’s gender or other, I think you’re seeing an emphasis on it because it’s an important thing to do.”

Many of the executives in Protiviti's guide discuss the increasing use of data analytics technology to help auditors decide what they’re going to audit.

“It helps you define the universe,” said Wright. “You run some numbers and look for some themes, the things that are in place or out of place. It helps you focus where you’re going to go.”

Another trend he sees in the profession is auditors getting ready for the Financial Accounting Standards Board’s new standards on revenue recognition and leasing, which are scheduled to take effect in the next few years. Internal auditors will need to closely monitor how the companies where they work are complying with the new standards. Protiviti released a report this month on audit risks arising from the revenue recognition standard and some recent guidance that the American Institute of CPAs is drafting (see AICPA Drafts Industry Guidance for Rev Rec Standard).

“With revenue recognition two years out and three years for lease accounting, those are going to be data driven exercises from an accounting perspective, and then the audits thereof,” said Wright. “In an ideal world, every company would do a diagnostic between now and the end of the third quarter, and decide whether or not they’re going to have substantial or insubstantial change from rev rec. Those that don’t should start working on lease accounting.”

He believes the yearlong gap between when the two standards take effect will give companies a little time to leverage their resources, but they shouldn’t wait too long, even though FASB has already decided to defer the revenue recognition standard for one year. Public companies will apply the new revenue recognition standard to annual reporting periods beginning after Dec. 15, 2017, while private companies will apply it to annual reporting periods beginning after Dec. 15, 2018. The lease accounting standard will be effective for public companies for fiscal years beginning after Dec. 15, 2018. For private companies, the leasing standard will be effective for annual periods beginning after Dec. 15, 2019.

“Many companies have not done anything yet on those two new pronouncements, but internal audit can be the catalyst,” said Wright. “They’re the key interface between the audit committee, which should have an interest in whether or not revenue recognition and lease accounting are done correctly, and management. They can be involved in setting the tone, following up, or doing pre- or post-implementation status reporting. It’s the kind of thing that should be on every audit committee’s agenda every meeting from now until it’s done. What we’re seeing is an intersection of accounting and internal audit’s role in being the catalyst for that activity and then the monitor of that activity. Data will either drive rev rec or will be the tool by which internal audit decides where they’re going to audit.”