The Financial Crisis and Its Impact on the Internal Audit Profession

KEY SURVEY FINDINGS A total of 1,761 members of GAIN's Flash Survey Network were asked to participate in a survey regarding the current economic crisis and its impact on the internal audit profession.1 Of this number, 524 chief audit executives (CAEs), internal audit directors and managers, and other audit professionals participated in the survey, representing a 30 percent response rate.2 For the purposes of this report and analysis, this group was consolidated into the responses from North American-based organizations3 with revenues exceeding US $100 million. The survey results discussed throughout this report are based on the responses from this consolidated group. The consolidated survey respondents have internal audit activities consisting of either 3-6 or 7-15 internal auditors (29.1 percent each) ,4 and have annual revenues ranging from US $1 billion to less than US $10 billion (46 percent). To further understand how the current economic crisis has affected organizations in different business sectors, all responses were further analyzed through three filters or categories: 1. Responses from survey participants working in the financial services, banking, and real estate industry (117 organizations). 2. Responses from participants working in Fortune 100 companies (34 organizations) . 3. Responses from participants working in organizations that have accepted or are planning to accept TARP funds, which include the government, nonprofit, and education industry sectors (73 organizations).5 Out of this detailed analysis emerged five main research findings: 1. The economic recession has impacted not only organizations, but their respective internal audit activities as well. 2. Internal audit activities are transitioning risks that received extensive focus in recent years and concentrating more on emerging risks that resulted from the changing economic conditions. 3. A majority of respondents disagree with the statement that better risk management could have played a role in preventing the current crisis, yet most respondents agree internal auditing could have done more to assist their companies in identifying key risks. 4. Changing stakeholder expectations are impacting the focus of internal audit efforts. 5. Internal audit oversight and coverage of emerging risks associated with the acceptance of government stimulus funds are lacking.download