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The amount and complexity of information created and overseen by the auditors in terms of expenses, earnings, and taxes will also increase. The ongoing growth of global organizations is also demanding greater auditing expertise concerning international laws and trade in addition to international mergers and acquisitions.
Following Enron and the other financial scandals, Congress passed laws to curtail organizational accounting fraud. This legislation requires public companies to maintain established internal controls to guarantee the accuracy and reliability of financial reporting and analysis. Although not part of this legislation, private companies have to be just as concerned about financial crimes such as embezzlement, theft, and securities fraud. Computer and Internet technology is making such crimes easier to commit, and the number of them are rising.
Over half of the 400 respondents of PricewaterhouseCoopers' second annual "State of the Internal Audit Profession" 2006 survey said Sarbanes-Oxley (SOX) lead to an increase in internal audit resources. Thirty five percent of those surveyed said they had expanded their personnel by 25% or more after the legislation was passed. However, simultaneously, 32% were actively trying to find candidates for auditor positions that have been vacant for over six months -- the same number as in 2005.
In today's operating environment, the demand for internal audit resources has increased much faster than internal audit capacity - a situation that raises serious concerns about the ability of internal audit groups to address higher level risks facing their organizations," said the Pricewaterhouse Cooper report.
The report noted the growing need for audit professionals who have the ability to "evaluate and test internal controls, audit complex areas, address enterprise-wide risk and governance issues, and provide insight into the adequacy of financial controls." The study also found that half of the organizations responding now use continuous auditing techniques, an increase from 35% in 2005. Another 31% plan to implement continuous auditing in the future. "This may be the beginning of a significant change in the way internal auditing has traditionally been done," said Dick Anderson, a partner in PricewaterhouseCoopers Advisory.
AVERAGE CURREN COMPENSATION OF INTERNAL AUDITORS
The United States Low Median High
Internal Auditor I $36,589 $42,166 $48,275
Requires bachelors degree
Little creativity required
0 -- 2 years of experience
Internal Auditor III $54,097 $63,007 $72,764
Requires bachelors degree
Wide degree of creativity and latitude years of experience
Although the Internal Auditor Certification (CIA) given by the Institute of Internal Auditors (IIA) is not mandatory for internal auditors, a number of companies are looking for CIA candidates only. Betty McPhilimy, the 2004/05 chairman of the board for the (IIA) says in a 2004 interview with the CPA Journal, "the CIA is the premier global certification for internal auditing -- a crown jewel that we strenuously protect to make sure that it continues to reflect the appropriate priorities for internal auditors."
The IIA made considerable changes to its CIA program and curricula in May 2004, after undertaking an international research study that centered on the expertise, skills, and abilities that underlined the common pool of knowledge for its CIA examination. A significant change consists of the test's three parts that make up the center international syllabus, which focuses on corporate governance and risk deliberations. A fourth section emphasizes general business management issues.
To become a CIA, candidates must possess knowledge of both the core global syllabus and either specialized audit-related subject matter or general business management.
Institute of Internal Auditors (http://www.theiia.org/)is the main organization for internal auditors. Established in 1941, IIA is an international professional association of about 122,000 members with global headquarters in Altamonte Springs, Florida. Throughout the world, The IIA is recognized as the internal audit profession's leader in certification, education, research, and technological guidance.
INTERNAL AUDITOR.COM (http://www.internal-auditor.com/)is a source for information relating to internal auditing, including the free newsletter QMS Internal Auditor.
Dalton, Dan and Dalton, Catherine. "
Sarbanes-Oxley legislation and the private company: if not a marriage, then certainly an engagement" The Journal of Business Strategy. 2005. 26.2 (2005), 7-9.
Harrington, Cynthia. "Internal Audit's New Role." Journal of Accountancy. 198.3 (2004), 65-71
Institute of Internal Auditors. Internal Auditors Certification. 8/9/06. http://www.theiia.org/.
Pricewaterhouse. "2006 State of the internal audit profession study: Continuous auditing gains momentum." 8/10/06 http://www.pwc.com/extweb/pwcpublications.nsf/docid/1981a92e13dee3cf8525718b006de802
Smith, Gene. "Communications skills are critical for internal auditors. Managerial Auditing Journal. 20. 5 (2005), 513-520.
Tidrick, Donald E. "Seize the Moment: Interview with IIA Chairman Betty McPhilimy." (April 2004). 8/10/06
U.S. Department of Labor. Occupational Outlook Handbook. 8/10/06 http://www.bls.gov/oco/.
Wells, Joseph T. "Small Business, Big Losses." Journal of Accountancy, (Dec.2004), taped Norwick rather than take notes, because I felt this was less intrusive than typing on my notebook. He is a calm, easy going guy who was really pleased to see me and talk about his profession and his plans. He expects to stay with this company "as long as it's a challenge" and then head off to another company. He likes working for the smaller, privately owned companies rather than the larger public ones, because he likes being the big fish in the small pool. He feels he has better opportunities here and is more recognized for his work.
He said that he was glad that he went for the certification, since that may have been a big plus when he applied for this job. Off the record, he added that there are always plusses and minuses to every job. Because this is a smaller company, it does not have the resources nor support to do some of the things he wants to do. Also, although it is farsighted in some areas, in others it is behind the times. Communication between the hourly and salaried employees, for example, could be improved. Overall, however, he is glad he took this position. It is giving him a lot of experience and networking opportunities that he can use for his next…[continue]
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Apollo Shoes, Inc. Internal Audit has completed a review of the Apollo Shoes Corporation in conformity with the fiscal year 2005-2006 plan and as advised by the Sarbanes-Oxley federal requirements. The objective of this review was to contribute to the improvement of risk management and the control systems within the Apollo Shoes Company by identifying and evaluating the company's exposures to risks and the controls designed by management to reduce those
In other words, if the financial difficulties they encounter are the fault of the auditing firm, they will have protection from any legal ramifications they may have encountered from faulty accounting or auditing measures. Preventive measures are also part of the internal controls of the auditing firm itself, so that each person who works with that firm knows the measures that are to be taken to make sure auditing
Audit Quality and Agency Cost Since the advent of industrialization, there has been the presence of a bond between the people who invest and the people who manage those investments, forming a vital relationship amongst the two groups. Although with the rise of such relationships, the soaring issues of trust and confidence have been a hindrance in economic growth. Viewing the high percentage of the capital of investors or shareholders in
Audit Quality and Agency Theory Auditors have existed since the 1300's and for most of that time, their role remained the same. Auditors were the life-line of governments and businesses, helping establishments maximize profit and efficiency, the benefits of which were enjoyed by everyone. As time passed, auditors were given new roles and worked routinely to assure the maximum profit of the company that employed them. In the past 50 years, however,
A major objective of the custodial Financial reporting system is to be continuously and accurately responsive to regular and ad hoc requests for custodial financial reports" (Website of the Internal Revenue Service, 2008). The new information system has not been entirely implemented in the meaning that it still in the stages of control and testing. Once its implementation has been completed, the FMIS is expected to perform the following tasks: Support
and, most internal auditors are still reporting to the CEO or chief financial officers -- the very people who were responsible for most of the past enormous scandals. Therefore, the affectivity of internal audits in correcting the original problems that caused the Enron scandal, for instance, is minimal at best right now. While SOX requires management to test internal controls over financial aspects of the corporation, this reporting structure
However, internal controls are more than just discovering errors and irregularities, controls go hand in hand with internal audits. Audits differ from controls in that an audit will provide "an objective, independent review of bank activities, internal controls and management information systems to help the board and management monitor and evaluate internal control adequacy and effectiveness" (Comptroller p. 2). Using audits and internal controls to provide information for the smoother and