IIA proposes needed changes to professional standards amid evolving role of internal audit
How fast is the internal audit profession changing? So fast that its main professional association, the Institute of Internal Auditors (IIA), is planning to update its bedrock professional standards. It says the current standards no longer meet the realities of how the internal audit world is changing.
Earlier this week the IIA proposed changes to its International Standards for the Professional Practice of Internal Auditing, which guide effective and acceptable professional practices and behaviors.
The move could provide some needed detail on how auditors should approach situations that could interfere with their independence and objectivity.
The standards are intended to help guard against conflicts of interest and compromised professionality. As internal audit continues to provide more risk assessment and assurance to different parts of the business, there are more chances that those conflicts and less-than ideal situations could arise.
The IIA made changes to its related International Professional Practices Framework (IPPF) last year, which provides more detailed guidance, including a code of ethics, core principles, and definitions. It says the changes to the professional standards are “designed to help practitioners meet challenges posed by today’s dynamic business environment and the evolving demands that environment creates on internal audit functions.”
“The demands on internal audit are evolving rapidly,” said IIA CEO Richard Chambers in a statement. “The IIA is working diligently to make sure the Standards and IPPF reflect that evolution.”
Among the primary changes proposed are new cautions to chief audit executives to take steps to safeguard their independence if they are also called on to fulfill responsibilities that fall outside the traditional boundaries of internal audit. Such safeguards “may include such activities as periodically evaluating reporting lines and responsibilities and developing alternative processes to obtain assurance related to the areas of additional responsibility,” the proposal says.
Two new standards added relate to roles internal auditors are taking on. “There is an expectation from the management that the auditor also has to wear many hats,” said N.G. Shankar, president of corporate audit at Anditya Birla Group, a building materials company based in India, during an IIA interview about the new proposal. “For example, when you have a chief audit executive that is also playing the role of risk manager or risk officer, the question is ‘how do you balance this role?’ Because on the one hand you need independence and objectivity, and on the other side you have to meet expectations of management.”
The proposed changes to the Standards are generally focused on three areas: enhancing existing standards on communications, and quality assurance; creating new standards addressing objectivity in assurance and consulting roles, as well as addressing new roles internal audit functions are taking on; and aligning existing standards to a new set of Core Principles incorporated into the International Professional Practices Framework (IPPF) last year.
The proposed changes will be open for review and public comment from Feb. 1 through April 30 through an online survey. After the exposure period, comments will be reviewed and final changes approved in the third quarter of 2016. The modified Standards will be announced on Oct. 1 and become effective Jan. 1, 2017.