Move over, strategy: Compliance needs you


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.


Internal auditors also can use a variety of tactics to improve their efficiency and give themselves more time for value-added activities, Jordan said. These efficiency-building tactics include:

Leveraging control testing across multiple compliance areas. Complying in multiple ways with various mandates through one test can save time but requires careful planning and coordination across functions. The percentage of respondents using this “one-to-many” approach grew to 54% from 49% the previous year. But there is room for more use of this tactic—92% of respondents said it’s possible to apply “one-to-many” principles to up to 50% of their control testing.

Using technology more effectively. Just 29% of respondents said their companies are using governance, risk, and compliance-specific (GRC) technology. That’s up from 23% in last year’s survey, but 36% of respondents said their organizations do not effectively leverage GRC technology. Respondents are using this technology most to manage their departments and report audit plans and results.

Using data analytics. Sixty percent of survey respondents are using data analytics to enhance the internal audit function. The top four benefits of using analytics were listed as increased efficiency; quick identification of patterns, trends, and relationships; increasing internal audit coverage; and (importantly) improving the strategic value of the internal audit function.

Upgrading staff skills. Forty percent of respondents said talent quality or capacity is a barrier to delivering maximum value for internal audit teams. Jordan said internal audit can identify areas for improvement by conducting a skills gap assessment by mapping the audit team’s skills against the audit plan. “It’s in your plan, so you’ve got to acquire that skill, whether you do it in-house or out,” he said.

The full version of this article, “Regulation Demanding Increased Internal Audit Focus,” by Ken Tysiac, is available at

Jack Hagel, editorial director
CGMA Magazine

Also at

IT Expectations vs. Reality

Organizations with an agile, efficient IT infrastructure have a significant competitive advantage over those with insufficient technology, according to a survey by Softchoice, a North American technology services provider. And the IT departments that are well-equipped are far more likely to be viewed as strategic business partners.

The gap can lead to a difference of opinion about IT’s role in an organization. Ideally, IT managers would spend more time on security and strategy. In reality, according to the survey, they spend most of their time on maintenance and the least of their time on strategy. Seventy percent of IT managers spend less than 25% of their week on strategic projects.

Eighty percent of front-office managers see IT as a cost center instead of as a revenue generator, the survey said, and 31% don’t involve IT when purchasing new software for their departments.

The full article, “Expectations and Reality Vastly Different for IT Departments,” by Neil Amato, is available at

CFOs Taking on COO Duties

Large public companies continue to eliminate the COO position, a development that has important implications for the responsibilities and career paths of CFOs.

Just 35% of Fortune 500 and S&P 500 companies employed a COO last year, according to executive search firm Crist|Kolder Associates’ Volatility Report 2013. That was down from 39% in 2012 and is the lowest percentage since at least 2000, when 48% of companies in the survey had a COO.

Crist|Kolder Managing Director Josh Crist says more firms are saving money by eliminating the position and handing off its duties to other posts, including CFOs.

Ambitious finance execs now need to better understand everything from strategy to supply chains, Crist says. That gives them a better chance at becoming CEOs themselves one day but also requires that finance execs obtain broader experience by serving time in other parts of the company.

The full article, “Study Shows Ambitious Finance Execs Need to Network, Broaden Skillset,” by Chris Baysden, is available at


CGMA Magazine is published in conjunction with the Chartered Global Management Accountant designation, which was created through a partnership between the AICPA and CIMA. The magazine offers news and feature articles focused on elevating and emphasizing management accounting issues.


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