Internal Audit 2020 Final [Read-Only]

1 Sharpening our Focus on the Road Ahead: Internal Audit in 2020 Carolyn Saint, CIA, CPAVice President, Internal Audit7-Eleven, Key achievements of the past decade Where we find ourselves in 2013 Five imperatives for the remainder of the decade Attributes of high performing Audit functions in 2020 Five strategic risks that could derail our progressSharpening our Focus on the Road Ahead:Achievements from The Past DecadeKey Achievements From the Past Decade: Risk-centric transformation Enhanced stature Enhanced controls assurance reputation Helping our organizations navigate a decade of crises Emerging as a sourceof talentSharpening our Focus on the Road Ahead:Where We Find Ourselves in 2013 Five Key Trends in 2013 Outlook for resources is strong Internal Audit plans realigned to reflect risks Stakeholders focused on key risks Requisite skills continue to evolve Strong Audit committee supportTrend 1: The Outlook for Resources is Strong Budgets: Staffing.

2 IncreaseStableDecreaseOverall41%50%9%F50 039%48%13%Projected Change from 2012-2013 IncreaseStableDecreaseOverall24%71%5%F50 029%61%10%Projected Change from 2012-2013 Trend 2: Internal Audit Plans Have Realigned to Reflect RisksFraud 4%Operational24%Financial General 13%Sarbanes-Oxley 12%Compliance 14%Strategic/Business 4%Other 12%Risk Mgt Assurance 5% Trend 3: Our Stakeholders are Focused on Key RisksAudit CommitteeExecutive Management1 Compliance risksStrategic/business 2 Operating risksOperational 3IT (general) risksCompliance 4 Financial risksFinancial 5 Strategic risksIT- generalSource: The Pulse of the Profession: 2012 The IIA Audit Executive CenterTrend 4.

3 Requisite Skills For Continue to EvolveAllF500 Analytical/critical thinking77%79%Communication skills66%68%Data mining and analytics47%51%Business acumen41%50%IT (general)39%38%Industry-specific knowledge35%34%Accounting29%35%Risk management assurance27%19%Source: The Pulse of the Profession: 2012 The IIA Audit Executive CenterOther Trends Worth Watching in 2013 Source: The IIA Audit Executive Center Internal Audit reporting lines Increased emphasis on emerging technology risks CAE qualifications Enhanced mainstream media interest in Internal Audit Emerging DC interest in Internal Audit Internal Audit compensationFederal Reserve Supplemental Guidance on Internal Audit Internal Audit quality assurance program should ensure that Internal Audit conform to IIA Standards CAE should reports administratively the CEO or the Audit committee should document the rationale otherwise Internal Audit

4 Should have a code of ethics that emphasizes the principles of objectivity, competence, confidentiality, and integrity, consistent with IIA Standards The charter should define when and how the Internal Audit function may outsource some of its work Internal Audit should issue an opinion on the adequacy of risk management processesSharpening our Focus on the Road Ahead: Outlook for the Decade AheadFive Imperatives For the Remainder of the DecadeEnhancing and leveraging a continuous focus on risksProviding assurance on risk management effectivenessEnhancing our proficiency with data mining and analyticsSecuring a seat at the table for operational and strategic discussionsSolidifying our expertise to address key risksEnhancing And Leveraging A Continuous Focus On Risks No surprises!

5 Annual risk assessment = a single snapshot Dynamic nature ofrisks requiresconstant attention Continuous risk assessments takemany forms: Key risk indicators Risk assessment by walking around Internal Audit should remain alert to: The highest rated risks from theannual assessment Risks with remote likelihood but high impact Risks that are on the radar of key stakeholdersEnhancing And Leveraging A Continuous Focus On RisksAssurance on the Effectiveness of Risk Management Failure of risk management is a legacy of the current global economic crisis Boards didn t exercise appropriate oversight Management took extraordinary risks for short term results Regulatory and legislative initiatives mandate greater risk management oversight by Boards Internal Audit is a

6 Natural resource for risk management assuranceYet we are still reluctant to embracethe challenge: 57% - No coverage planned in 2012 93% - Coverage comprises less than 10% of total Audit plan 04% - Average allocation of Audit plan The only good news: 33% are increasing coverage from 2011 levelsAssurance on the Effectiveness of Risk Management We operate in a data-intense environment Data mining and analysis has emerged as a major priority for many Internal Audit departments Data analysis: Permits analysis of entire population versusstatistical sample Increases efficiency by analyzing more data in less time Facilitates more frequent and timely assessments Improves ability to respond to urgent eventsEnhancing Our Proficiency with Data Mining and Analytics Key considerations in the use of data miningand analytics.

7 Identify the uses (including types of audits) that would benefit from data analytics Assess skills of the Internal Audit team, identify gaps,and remediate Identify and acquire the best tools that address your needs Develop standards and policies for the deployment/use of the tools Strive for continuous improvementEnhancing Our Proficiency with Data Mining and AnalyticsSecuring a Seat at the Table Strategic and business risks present the greatest threat to shareholder value Traditionally focus on financial and compliance risks Stakeholders are seeking value from.

8 Focus on full portfolio of risks Insight Institutional knowledgeA Seat at The Table Comes with responsibility Opportunity to learnand contribute Not to identify Audit leads Take a dish to the table so that others can feast onour knowledgeSecuring a Seat at the Table Solidifying our Expertise to Address Key Risks Collective knowledge must be capable of addressing the full portfolio of risks 2000 s was the decade of financial Audit expertise Diversification of Internal Audit s focus has exposed knowledge gaps: Knowledge of the business/industry Fraudinvestigation/ Audit capabilities Understanding how to Audit operating, strategic and business risksSolidifying our Expertise to Address Key RisksTop 5 Risk Areas Where Stakeholders Seek Enhanced IA Capabilities1.

9 Data privacy and security (46%)2. Regulations and government policies (32%)3. Fraud and ethics (31%)4. Large program risks (29%)5. New product introductions (29%)Source: Aligning Internal Audit Are You on the Right Floor? PwC s 2012 State of the Internal Audit Profession Study 2012 PricewaterhouseCoopers LLP. All rights reserved. Used with our Focus on the Road Ahead:The High Performing Internal Audit Function of 2020 Internal Audit 2020: Attributes of a High Performing Department Fully integrated into the C-Suite trusted advisor A respected source of insight and foresight A state of the art technology platform A magnet for talent with deep business expertise The Third Line of Defense Three Lines of Institute of Internal Auditors.

10 Raising the Bar to Serve the Profession The IIA s Core Purpose in North AmericaTo advance the Internal Audit profession and serve our IIA By The Numbers United States: 63,000 members in the United States 136 chapters 40,000 CIA s Globally: 180,000 members in 190 countries 107 institutes on 6 continents 115,000 CIA s The IIA HQ 190 staff $42 million of revenue (a 50% increase since 2009)Recent IIA Initiatives:Enhancing Member Services Launched the Audit Executive Center Introduced Free Member Webinars Enhanced and rebranded annual GAM Conference Launched Internal Auditor Magazine online (with App) Launched Internal Auditor Magazinein Spanish Launched Launched Certification in Risk Management Assurance Designed and launched new member websites Engaged DC government relations firm Expanded our media presence Facilitated New Global and NA Strategic PlansThe IIA.