Second Quarter 2012

IIA Research Foundation Announces 2012 Donald E. Ricketts Award Winners The Foundation’s Donald E. Ricketts Award is a shining example of how IIA chapters and institutes are stepping up to the plate and doing their part to provide a local perspective on issues that affect the profession as a whole, so that practitioners everywhere can benefit. The award, in memory of Dr. Donald E. Ricketts — who was a member of The IIA and The IIA Research Foundation Board of Research Advisors (now CREA) and chairman of the Chapter Research and Doctoral Dissertation Committee since its inception — invites chapters and institutes to participate in a research competition by submitting a project on a topic of relevance to their local chapter or institute. The winners are honored at The IIA’s Annual Leadership Conference and receive chapter achievement program points for their participation. Read More...

Practicing in Today’s Reality While Keeping an Eye on the Future The internal audit landscape is unpredictable. New issues arise daily and existing issues grow in complexity, making it critical for practitioners to remain nimble. It is the reason The Institute of Internal Auditors’ (IIA’s) Chicago Chapter develops programs like its annual seminar to empower its members to keep pace with the demands of the profession. The 52nd Annual IIA–Chicago Seminar, held in Rosemont, Ill., on March 26, 2012, was created around three calls to action: Innovate, Integrate, and Interact. Read More...

Sawyer’s Internal Auditing: Then and Now The year began with President Richard Nixon proclaiming, “I am not a crook,” at the start of the Watergate hearings in the U.S. Senate and ended with the Dow Jones closing at 850 points. A gallon of gas cost $.40, the average annual income was $12, 900, and the average price of a new home was $32,500. It was 1973, signaling the end of the Vietnam War and the launch of Skylab, the first U.S. space station. It was a year frenzied with activity that left a nation searching for a road to recovery and starving for a sense of security. Read More...

The Resolve to Evolve

Focusing your energy to grow, develop, and expand your perspective and add value is a conscious choice; a choice that Frank O’Brien, CIA, makes on a daily basis. His resolve to continue to evolve both personally and professionally makes him an indispensible part of The IIA Research Foundation’s (IIARF) Committee of Research and Education Advisors (CREA). A dedicated husband and father of two — who commits wholeheartedly to every endeavor he undertakes — O’Brien has found success by employing a simple philosophy. “Do what you do best, do it exceptionally well, and become the best that you can be,” says O’Brien. “Opportunity will follow.” Read More...

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Wayne Moore presenting the Ricketts Award to Greg Estes of the Dallas

Chapter

The IIA Research Foundation’s (IIARF) president Patricia E. Scipio, Ph.D., CIA says goodbye. It goes without saying that it has been both an honor and a privilege to serve as The IIA Research Foundation’s (IIARF) president. As my term nears its end and I reflect back on the tremendous experience it has been, I want to express my sincere gratitude to everyone who has made this such a rewarding journey. When I think of all that we have accomplished over the last couple of years, I am struck by both the depth and the breadth of the lessons I have personally learned while serving you — knowledge that I will be able to use for the rest of my career to continue to grow as a practitioner and to help the profession evolve. Read More....

IIA Research Foundation Announces 2012 Donald E. Ricketts Award WinnersThe Foundation’s Donald E. Ricketts Award is a shining example of how IIA chapters and institutes are stepping up to the plate and doing their part to provide a local perspective on issues that affect the profession as a whole, so that practitioners everywhere can benefit. The award, in memory of Dr. Donald E. Ricketts — who was a member of The IIA and The IIA Research Foundation Board of Research Advisors (now CREA) and chairman of the Chapter Research and Doctoral Dissertation Committee since its inception — invites chapters and institutes to participate in a research competition by submitting a project on a topic of relevance to their local chapter or institute. The submissions are evaluated by the committee based on quality of work, interest and practical value, topic originality, and basis for further research. The winners are honored at The IIA’s Annual Leadership Conference and receive chapter achievement program points for their participation.

This year’s first place award was presented to The IIA–Dallas Chapter for their submission, Cloud Computing: A Study of Internal Audit’s Preparedness in the Dallas Area. A current buzz word, the term “cloud computing” can be heard from television commercials to boardrooms. With its research study, IIA–Dallas set out to:

Define the term as it relates to internal auditing.•Gauge where it falls on the “Hype Curve.”•Determine what level of familiarity practitioners had with the subject and implications.•Uncover what strategies practitioners were using to measure and mitigate the associated risks.•

The report included a literature review as well as a survey that yielded 133 responses representing a range of countries, industries, and job titles. The report concluded that industry experts and internal audit professionals alike anticipate that cloud computing is an issue that will remain relevant for the foreseeable future and only gain importance as the various service models evolve. The results of the survey suggested that internal audit is not highly involved in cloud implementations, which the research committee noted usually has negative consequences in the form of control deficiencies or unmitigated exposure to risk. Overall, the report brought to light the tremendous opportunity for growth and development that the profession has relating to its role in cloud computing and urged continued research and further development around training for the issue.

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While the first place winner focused on a relatively new issue within the internal audit community, this year’s second place winner, The IIA–Austin Chapter, revisited an established yet always critical issue. IIA–Austin’s submission, Best Practices in Implementing Quality Assurance & Improvement Programs, focused on the activities and practices of internal audit departments related to general compliance with Standard 1300 of The IIA’s International Standards for the Professional Practice of Internal Auditing (Standards), with more focused and specific information on internal assessments (Standard 1311). The report used a literature overview, a survey, and a case study review to provide insight as to how to most effectively conduct an internal assessment and what the ultimate benefits are to the internal activity.

As all IIA members — and optimally all internal audit practitioners in general — should strive to comply with the Standards, it is a project that IIA–Austin Research Committee Member Karin Hill says is relatively timeless. “This is an important topic that anyone striving to comply with the Standards will visit eventually, so we feel it will be useful for some time to come,” says Hill. “The report provides readers with examples and discussion of different elements audit departments include in Quality Assurance and Improvement Programs.”

Perhaps equally as important as the information contained within the report IIA–Austin produced was the motivation Hill says was behind her participation in the project; a motivation that if shared among all practitioners will serve to immeasurably strengthen the impact the profession can have throughout the global business community. “Participating in the Ricketts annual research competition is a way to put The IIA’s motto “Progress through Sharing” into practice,” says Hill. “It also gives the committee a chance to learn how the selected topic has evolved and how others in the profession are viewing and addressing that area.”

Practicing in Today’s Reality While Keeping an Eye on the FutureThe internal audit landscape is unpredictable. New issues arise daily and existing issues grow in complexity, making it critical for practitioners to remain nimble. It is the reason The Institute of Internal Auditors’ (IIA’s) Chicago Chapter develops programs like its annual seminar to empower its members to keep pace with the demands of the profession. The 52nd Annual IIA–Chicago Seminar, held in Rosemont, Ill., on March 26, 2012, was created around three calls to action: Innovate, Integrate, and Interact.

The chapter supported the challenge by providing over 900 attendees with a stellar speaker line-up that included the vice president of internal audit at Raytheon Company and IIA North American board chair, Larry Harrington; former chief financial officer and applauded whistleblower of HealthSouth Corporation, Weston Smith; and managing editor for Thompson Reuters’ Governance, Risk, and Compliance division, Scott McCleskey; to name a few. Incoming IIA–Chicago Chapter President Rebecca Nilson, who was heavily involved in the planning, says it was important to design an event with diverse sessions and topics that included a track for specific industries, as well as IT auditors.

With six tracks that covered everything from the social media revolution and controls in the new technological environment to regulatory intelligence and key risks for non-profit and higher education, the event was a resounding success. “Our goal was to increase attendance by at least five percent,” says Nilson. “We achieved over a ten percent increase.” The relevance of the topics served as a compelling draw that delivered. “In the end, we wanted each attendee to be able to take away something tangible that would help them immediately in their job and with their career going forward,” says Nilson.

It is this combined focus on addressing what is happening today while keeping an eye on the future that has made IIA–Chicago Chapter one of the largest and longest-standing chapters in the IIA family. The third IIA chapter to be formed, IIA–Chicago Chapter not only works to ensure its individual members are prepared to rise to the challenges they face, they also invest in ensuring the profession as a whole moves forward. In 2005, the chapter hosted The IIA’s 64th International Conference in Chicago. It was the largest and most successful International Conference held up to that time. However, the chapter wanted to take the success of the event a step further. “We wanted to give back to the profession by committing part of the chapter’s share of the financial surplus from the conference to research,” says John Covell, an IIA–Chicago Chapter board member. “We did this in the form of a five-year commitment to The IIA Research Foundation, with hopes of encouraging other chapters and individuals to follow our lead in making a long-term commitment to The IIARF.”

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The result was a $125,000 commitment to support IIARF research over five years. The Chapter chose to direct its $25,000 contribution in 2009 toward supporting IIARF research that has resulted in a new report titled IFRS Implementation: Best Practices for Organizational Value. The book, being released in June 2012, combines survey results and six in-depth case studies of Canadian and U.S. corporations at various stages of International Financial Reporting Standards (IFRS) conversion. “While IFRS has temporarily taken a backseat to other issues such as UK Bribery Act, FCPA, Dodd-Frank, and cloud computing due to adoption delays, we believe this book will help provide a roadmap as to how to best adapt to the issues and stay ahead of the curve.” says Nilson.

And with the aim of taking a forward-looking approach, it appears the release is well timed, as James Kroeker, chief accountant of the U.S. Securities and Exchange Commission (SEC), has recently said he “is optimistic” his staff will be able to present a plan in the coming months for transitioning accounting and financial reporting by U.S. publicly listed companies from U.S. Generally Accepted Accounting Principles (GAAP) to IFRS over a period of two or three years.

Written in a style that is meant to be accessible to average "business-minded" readers, the book focuses on internal auditors’ ability to positively affect the conversion process by leveraging their holistic view of the organization. Author Louis Beaubien, Ph.D., CMA, CGA, a faculty member in the Accounting Department at the Sobey School of Business, Saint Mary's University in Halifax, Nova Scotia, Canada, says the number one challenge for organizations during the transition phase and then the subsequent implementation phase is intra-organization communication and the timely and dedicated use of organizational resources to implement the change. “It isn't a simple technical standard change but something that impacts the entire organization,” says Beaubien. When conducting the research for the book, Beaubien says “The diversity of approaches surprised me. However, the company that had the best transition plan had internal audit heavily involved and success, effectiveness, and efficiency seemed to change linearly with IA involvement.”

He hopes the book will help practitioners advocate for their role in the implementation, as they have tremendous value to add. He cites process mapping as a prime example of where internal auditors can add practical value. “It is an essential process for the transition to work. Internal auditors are well trained in process mapping and the strategic impact that effective control systems have. They understand it well both theoretically and practically,” says Beaubien. “Good internal auditors also know the processes of the organization backwards and forwards and can advise best on what can be done to change the procedures to minimize transition related disruptions.”

To arm practitioners with the information they need to play a successful role in the process, IFRS Implementation: Best Practices for Organizational Value provides:

An overview of IFRS and best practices for a successful transition.•A basic strategy for IFRS implementation from Canada and Europe.•Detailed recommendations for how internal audit can provide strategic and cost advantages in any future implementation projects in the U.S.

•

The project is a proactive approach to an uncertain yet still relevant issue that John Covell is proud to have had IIA–Chicago Chapter support. “We did, and we still do, believe that IFRS is a big deal. Many of our members currently work extensively with IFRS as members of global companies. Additionally more than 120 countries have implemented IFRS, and it is helping to develop a common set of accounting standards worldwide. This is already helping investors and supporting improved financial reporting and transparency in many countries that formerly had relatively rudimentary financial accounting standards and oversight of them,” says Covell. “Our sense is that IFRS is coming. We wanted to support our members and the profession in being ready for it.” You can find a downloadable version of the IFRS Implementation: Best Practices for Organizational Value available for purchase in The Research Foundation Bookstore now.

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The year began with President Richard Nixon proclaiming, ñI am not a crook,ò at the start of the Watergate hearings in the U.S. Senate and ended with the Dow Jones closing at 850 points. A gallon of gas cost $.40, the average annual income was $12, 900, and the average price of a new home was $32,500. It was 1973, signaling the end of theVietnam War and the launch of Skylab, the first U.S. space station. It was a year frenzied with activity that left a nation searching for a road to recovery and starving for a sense of security.

However, there were signs of resilience and signs of hope. It was the same year that the man who would come to be revered as “The Father of Modern Internal Auditing” introduced a publication that would drive the internal audit profession, and as a result the business community at large, forward for decades to come. The first edition of The Practice of Modern Internal Auditing, by Lawrence “Larry” B. Sawyer, was released in 1973, comprising 531 pages that painted the first comprehensive picture of the profession as a value-added asset in the business arena. The book was part of Sawyer’s lifelong quest to transform the image of the profession — which he playfully captured in a poem he penned just two years before its release — by empowering practitioners with a quick and comprehensive resource that allowed them to more effectively meet

stakeholders’ needs. A snippet of the “Then” portion of his poem, The Internal Auditor: Then and Now, shows just what a challenge he was up against:

The author Elbert Hubbard, in a moment born of pique, Described the classic auditor as something of a freak, The auditor, said Hubbard, is a man past middle age,

Spare, wrinkled, cold, and passive, although something of a sage. Polite and noncommittal, unresponsive as a post,

With eyes much like a codfish and the charm of burnt rye toast.

Now, nearly 40 years after its original publication, the spirit and soul that Larry Sawyer poured into The IIA Research Foundation’s (IIARF’s) flagship publication is alive and well. The sixth edition of Sawyer’s Internal Auditing will be released at The IIA’s 2012 International Conference being held in July in Boston, Mass. Since the original release of the book, the subsequent editions were expanded and enhanced to address the evolving issues of the day, with the fifth edition being published in 2003 at 1,446 pages. “The new edition is written with the auditor who is perhaps newer to the profession in mind and motivated to want to know the emerging practices from around the world,” says Jim Key, project manager for the update. He says it will also employ a more concise writing style and encompass roughly half the page count of the prior edition.

In the 70s, it would not have been unusual to see a practitioner sitting in a library thumbing through a hard copy of The Practice of Modern Internal Auditing to study for the Certified Internal Auditor® exam. In the decades that followed, it would likely be stashed in the backpack of many soon-to-be-practitioners, as it has been the number one internal audit textbook used by colleges and universities throughout the world. And in the not-too-distant future, it will not be uncommon to see the pages of the sixth edition of Sawyer’s Internal Auditing filling the screens of e-readers and smartphones in coffee houses and conference rooms around the world.

“The writers and editors were asked to organize their material from the perspective of how it would move to a digital environment,” says Key. Just as Larry Sawyer was one of the first to focus on the softer side of the profession, his work will serve as The IIARF’s first true e-book, and there are also plans to develop a smartphone application. “Practitioners increasingly want to access and navigate reference documents such as Sawyer’s sixth edition via a web-based or cloud-enabled resource,” says Key. “Once the printed text is available, the work begins on developing a subscription service, available electronically, that will enable updates to Standards, practice advisories, research material, and emerging best practices to be added and updated to the original material.”

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One thing that will not change is the unparalleled standard of quality that people have come to expect from Sawyer’s. It was a bar set for excellence established by a man whose energy for evolving the profession was unrelenting. “Sawyer’s sixth edition leverages the long tradition begun by Sawyer himself to present the practice of internal auditing as a forward-leaning profession that promptly responds to clients’ needs,” says Key. In addition to the three core modules of the new edition, which include internal audit basics, reporting and managing relationships, and information technology and emerging trends, Key is particularly pleased with a new module that has been added to the edition focusing on Governance, Risk Management, and Compliance (GRC). “It draws on the early advocates of this evolving approach to aligning all of the assurance activities with the value creation (or destruction) present in any business model,” says Key.

Those who knew Larry Sawyer personally say that his intense passion for spreading the word about the value of internal auditing came from his deep admiration for those who chose to rise to the challenges of serving as a practitioner, as he truly believed the internal auditor’s job was to serve. And to his credit, with the release of the sixth edition of his landmark work, there is no doubt that the “Now” portion of the description of the internal auditor in the poem he wrote more than 40 years ago has become a reality:

He’s warm and he is active, and commitment is his style, Exchanging ancient wrinkles for the crinkles of a smile.

Not petrified but flexible, adjusting to the times – To broader needs than merely counting pennies, nickels, and dimes.

The auditor with green eye-shades is gone, we hope for good; A problem-solving analyst emerges where he stood.

“He believed us to be the 'eyes and ears' for management, going where they could not, seeing what they would like to see, and hearing what they would need to hear,” says close friend and former IIA staff member, Michael Piazza, MA, MBA , CICA. “So we could summarize all of that information into helpful recommendations for the good of the organization.” The authors believe this latest edition will honor Larry Sawyer’s legacy by providing a quick, accessible, go-to resource that internal auditors can use to put them on the right track toward making informed decisions. The Resolve to EvolveFocusing your energy to grow, develop, and expand your perspective and add value is a conscious choice; a choice that Frank O’Brien, CIA, makes on a daily basis. His resolve to continue to evolve both personally and professionally makes him an indispensible part of The IIA Research Foundation’s (IIARF) Committee of Research and Education Advisors (CREA). A dedicated husband and father of two — who commits wholeheartedly to every endeavor he undertakes — O’Brien has found success by employing a simple philosophy. “Do what you do best, do it exceptionally well, and become the best that you can be,” says O’Brien. “Opportunity will follow.”

When he is not spending time with his family or indulging his passion for sports by taking in a Cardinals game or heading to South Bend with his daughter to see their Fighting Irish play, he is taking an active role in driving the profession forward. As Olin Corporation’s vice president of internal audit, he has found himself in a unique position to both witness the evolution of the internal audit profession over the last several decades and leverage internal audit’s expanded role in the business environment. During the late 80s and early 90s, he served as a senior internal auditor for the St. Louis-based organization. Then, 11 years after leaving the company to further his professional development, O’Brien was approached by Olin to return to the company to fulfill his current role.

“When I originally joined Olin in 1988, internal audit was the ‘police force’ tasked with enforcing company policies and procedures. Audit clients didn’t view what we did as providing value,” says O’Brien. “Today we focus our key objectives on aligning our resources and priorities with management’s value drivers and stakeholders' expectations; addressing critical strategic, financial, and operational risks; and serving as a source of risk management and control expertise within the company.”

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He credits this significant shift in internal audit’s approach, as well as management’s response, in large part to the efforts of The IIA. “The IIA has provided significant leadership and guidance to internal audit practitioners so that we can maximize our value to our companies,” says O’Brien. And he views his role as a CREA member for The IIARF as a key support to empowering practitioners to continue to evolve. As a CREA member he serves as a thought leader for the profession by helping to establish research topics and drive projects forward. The end results are tools, examples, and practice guides that assist practitioners in developing new processes and keeping audits fresh.

His involvement with CREA and The Foundation — as well as his involvement with The IIA in general which has included roles as treasurer and vice chairman of the board, professional services — is something O’Brien says has returned just as much to him as he has given. “My active involvement over the years has provided me with opportunities to develop my leadership competencies, and provided me with professional challenges and experiences that I could not obtain anywhere else,” says O’Brien. “Through these roles I have developed a vast network of peers, made many friends, and learned a great deal from their successes and failures. By far this combination has had the greatest impact on my career and is mostly responsible for any professional success that I have achieved.”

The IIA Research Foundation’s (IIARF) president Patricia E. Scipio, Ph.D., CIA says Goodbye Dear Friends and Colleagues:

It goes without saying that it has been both an honor and a privilege to serve as The IIA Research Foundation’s (IIARF) president. As my term nears its end and I reflect back on the tremendous experience it has been, I want to express my sincere gratitude to everyone who has made this such a rewarding journey. When I think of all that we have accomplished over the last couple of years, I am struck by both the depth and the breadth of the lessons I have personally learned while serving you — knowledge that I will be able to use for the rest of my career to continue to grow as a practitioner and to help the profession evolve. .

It has been the exceptional nature of the people I have worked alongside and the unparalleled quality of the projects that we have been charged with bringing to fruition that allowed me to maintain my energy and passion to fulfill the duties of my role. I accepted the role of president with eyes wide open, knowing it was an incredible opportunity and an enormous responsibility. However, as I worked to balance the demands of maintaining my full-time job with PwC and my second job as IIARF president, I came to truly appreciate the immeasurable amount of coordinated and synchronized effort it takes by countless individuals to bring a research project from infancy to maturity.

During my tenure, the combined efforts of The IIA headquarters’ staff, The IIARF Board of Trustees , and the Committee of Research and Education Advisors has delivered key research and publications that have empowered practitioners to do better and to be better. I am proud of all the work that has been done. However, there are initiatives that shine in my memory as beyond exemplary.

The 2010 Common Body of Knowledge (CBOK) Study not only guides internal audit research through 2015, it has connected practitioners around the world and increased the profile of The Foundation. When we presented the CBOK results to the Global Council in Vienna, I was surprised by the lack of awareness IIA Institutes had related to the capabilities of the Foundation. Over several days I was able to engage in a constant dialogue with global leaders about the tremendous resource we have in the Foundation. In those moments, I realized both the overwhelming need for research that exists within the global community and the importance of my role in spreading the message about all the Foundation can and is doing to support the profession.

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As I pass the baton to the new IIARF president, I feel confident that the Foundation is well positioned to provide internal auditors with relevant and ready resources to help them meet and exceed stakeholder expectations. A key component to making this possible will be following through with The IIARF’s digital strategy. Within a year, we will have the necessary infrastructure in place to make delivering resources digitally a reality. I look forward to seeing this initiative take flight and soar with the release of numerous publications in the upcoming year.

In addition to seeing the digital strategy take flight, I am looking forward to watching the continued growth of the Audit Committee Forums we have established that offer global leaders and Chief Audit Executives a chance to have a meaningful conversation with their key stakeholders about the pressing issues facing our profession. My term as president has given me a deeper understanding of the challenges practitioners face in various parts of the world, and keeping this international conversation going will only serve to strengthen our profession as a whole. The next Audit Committee Forum will be held at The IIA’s 2012 International Conference in Boston, Mass., in conjunction with the National Association of Corporate Directors. I am looking forward to having a front row seat.

Finally, as I sign off for the last time in this newsletter as your IIARF president, I hope you feel more empowered, more knowledgeable, and more prepared to tackle the challenges you face as an internal auditor because of the work we have done over the last several years. I also hope you will serve as an ambassador for The Foundation and an advocate for the profession by sharing the value you have found with your peers and colleagues, and letting them know The IIARF is a ready resource they can always turn to for professional growth. I am excited about what lies ahead for The Foundation and the profession and look forward to continuing to support these efforts both financially as a committed IIARF donor and professionally as a practitioner whose work and career has been immeasurably enriched through its existence.

With warm regards, Patricia E. Scipio, Ph.D., CIA

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