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Banks estimate audit budgets to increase because of Dodd-Frank

A recent report revealed that a significant percent of chief audit executives expect the resources and budgets of their internal audit departments to either increase or siphon off next year, the highest percentage since 2008.

The report, conducted by the Institute of Internal Auditors, polled 545 chief audit executives and internal audit directors at various firms, revealing that 41 percent of respondents expect an increase in their resources in the coming year, while 50 percent expect their budgets to stabilize. Only nine percent expect their budgets to decrease, the smallest percentage since 2008, according to Accounting Today.

Significant changes have not been made to internal employee whistle-blowing programs, despite an announcement by the Securities and Exchange Commission of its first Dodd-Frank whistleblower program, which allows an informant to receive 10 to 30 percent of the financial recovery if their information leads to monetary penalties of more than $1 million. Fewer than five percent of chief audit executives are worried that employees may bypass internal whistle-blowing programs to report incidents to the SEC.

“The internal audit profession has played a crucial role helping organizations identify instances of unethical employee behavior as well as providing recommendations that have enhanced detective and preventive controls,” Richard Chambers, the president and CEO of IIA, said, Accounting Today reports. “Given the visibility of the post-Dodd-Frank whistleblower provisions, we were surprised to learn that employee whistle-blowing remains virtually unchanged since 2011.”

Additionally, 84 percent of all survey respondents said that the number of hotline claims has stayed the same since August 2011.

“This could well mean that for most organizations, internal hotline practices have been working successfully and the advent of the whistleblower provisions from Dodd-Frank simply helped to remind organizations to continue ensuring their internal process are adequately robust,” Chambers said, according to Accounting Today.

The survey also found that audit coverage over the next year may lag in risk management effectiveness and strategic risk. More chief audit executives also plan to concentrate on recruitment consistent with areas of emerging audit coverage, seeking individuals with skills in analytical thinking and communication.

The survey found that internal auditors are distributing their portfolio more evenly to align with the risks many firms will deal with. Most of the coverage in 2013 will focus on non-financial areas, including compliance and IT and operations.

“While 2013 is promising to bring about positive opportunities for internal audit, CAEs need to take advantage of this period to ensure their teams are positioned for ongoing success,” Chambers said, Accounting Today reports. “Doing so will help to make sure the internal audit profession continues to enhance its relevancy in the face of the increasing velocity of change.”

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