Academic journal article Journal of Accountancy

Move over, Strategy: Compliance Needs You

Academic journal article Journal of Accountancy

Move over, Strategy: Compliance Needs You

Article excerpt

The push continues for internal auditors to focus on strategic risks, but regulatory compliance duties are standing in the way, a new survey shows.

Sixty-nine percent of 433 internal audit professionals in the United States surveyed by Grant Thornton said regulation is increasing internal audit costs in their organization, and 36% said regulation will prevent internal audit from devoting resources to higher-value activities.

"You can't walk away from your responsibility to address the compliance requirements," said Bailey Jordan, CPA, an internal audit practice leader at Grant Thornton. "They have to be done."

Emerging regulatory responsibilities that are adding to internal audit's workload in the United States include: The Dodd-Frank Wall Street Reform and Consumer Protection Act, health care reform, anticorruption regulations, payment card industry regulations, and the newly updated internal control framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

At the same time, the percentage of Grant Thornton survey respondents who consider strategic risk their top audit focus grew to 21% in 2014 from 18% the previous year.

And North American chief audit executives (CAEs) responding to an Institute of Internal Auditors (IIA) survey said strategic business risk ranked as the top priority for management and audit committees.


It appears as though internal audit departments will have more resources at their disposal in 2014 as they attempt to meet compliance challenges. Forty-one percent of North American CAEs in the IIA survey said their budget will increase this year.

Internal auditors may need those extra resources to deal with the impact of regulation. One way for internal audit to provide more value in this environment, according to the Grant Thornton report, is to use compliance activities to contribute in strategic, operational, and financial risk areas.

Almost half (45%) of respondents in the Grant Thornton survey said regulations' impact on their organizations is improving their governance and the rigor of their testing. Jordan said internal audit can add value by facilitating discussion among compliance functions within an organization such as legal, human resources, and IT. …

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