A brief look at this week's news insights that impact internal auditors
February 17, 2017
Congress is being pressured to soften a Sarbanes-Oxley rule by business groups, Shadow IT is slowing down the adoption of the cloud thanks to a shortage in cybersecurity skills, and internal audit departments are becoming more customer service oriented. This and more in this edition of This Week in Internal Audit.
Business Groups Want to Soften Sarbanes-Oxley Rule
As President Trump aims to strip down the Dodd-Frank Act put in place following the 2008 financial crisis, some business groups would like to go one step further. Congress is now being urged by the groups to dissolve a Sarbanes-Oxley Act provision. The rule currently enforces internal auditors to weigh in on the policies and procedures tied to a company’s internal controls. Those in favor of the rule believe its critical in certifying that investors are receiving error-free information tied to the organization’s performance.
FASB Roundtables Attempt to Define Materiality in GAAP
An amendment proposed to an accounting standard by the Financial Accounting Standards Board is aimed at defining whether disclosures are material. Roundtable meetings are being held by the private sector organization in March to discuss the topic and reach a decision on the suggested changes to the accounting principles. The amendment that would change the current GAAP definition of materiality, is believed by some investor advocates to ultimately allow companies to provide less information to investors. An investor advisory panel at the SEC also received the proposal issued by FASB with concern.
Study: Shadow IT Slowing Down Cloud Adoption for Companies
A new study revealed that the main challenge IT departments face as it relates to cloud adoption is Shadow IT. Employees working off of solutions built into companies without organizational approval is slowing down cloud adoption, according to Intel Security’s report that surveys 2,000 IT professionals. Shadow IT activities may be a result of the lack of cybersecurity skills, which respondents also attributed to slowing down the pace of cloud adoption. Nearly half of the IT professionals surveyed indicated that the skills shortage results in low visibility into Shadow IT activities.
International Anti-Corruption Enforcement Reach Staggering Levels
Anti-corruption enforcement numbers tied to fines and penalties have skyrocketed in 2016. The Foreign Corrupt Practices Act served as the catalyst in anti-corruption and bribery enforcement, but the partnerships developed between global regulatory authorities have attributed to the upswing in fines and penalties. The U.S. Justice Department and the SEC have worked diligently to collaborate with global counterparts to increase efforts surrounding anti-corruption enforcement in jurisdictions outside the United States. In their war against bribery and corruption, the regulators have developed best practices surrounding anti-corruption compliance programs that partnering countries can benefit from.
How Internal Audit Departments are Becoming Customer Service Oriented
The internal audit function is shifting from being a division within the business that’s typically perceived as a policing department to one that is more of a trusted business partner. More internal audit operations within companies are treating audits as customers, focusing on both the service and the value they provide. Companies taking this approach are ensuring the function becomes more of an asset to the organization, and it ultimately perceived as a department consisting of teammates rather than adversaries. By treating auditees as customers, internal auditors are required to have an even greater understanding of the business and the industry.
PCAOB Updates New Audit Participant Form
The Public Company Accounting Oversight Board’s staff guidance has been updated with changes affecting its new audit participant form. Intended for firms to disclose the names of accounting firms that participate in audits, the updated staff guidance now offers counsel on how firms should treat staff involved in “secondment arrangements” - when an employee is assigned to work for another firm temporarily. This would include an accounting firm’s employee in one country is physical located in another country, working in another firm’s office for at least three consecutive months. In this case the PCAOB believes employees in a secondment arrangement should be treated as if they are employed by the firm in which they were assigned to.