The accounting standards overseer is proposing additional reporting on tax changes and cash held abroad

By Joseph McCafferty

July 27, 2016

The Financial Accounting Standards Board issued a proposed Accounting Standards Update that is intended to enhance disclosure requirements on business income taxes. The proposal would require public and private companies to change the way they report income taxes on their financial statements to include more information about country-by-country tax reporting and more about the cash they hold overseas to avoid paying U.S. taxes on foreign earnings.

The proposed update is part of the FASB's broader disclosure framework project to improve the effectiveness of disclosures in notes to financial statements by clearly communicating the information that is most important to users of a reporting organization's financial statements.

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What every internal auditor should know about assessing plans for what to do when there's a data breach

PODCAST

Interview by Joseph McCafferty

July 26, 2016

No organization is 100 percent safe from hacks, cybercrime, or boneheaded employee actions that can expose the company to data breaches. Most companies have shifted from a purely prevention mindset to one of a risk-based approach to cybersecurity with a robust incident response plan. Yet too often that plan isn't updated, assessed, and regularly tested for effectiveness. That's where internal audit comes in. Internal auditors have a large role to play in ensuring that the incident response plan is up to snuff and functioning properly.

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Companies—and regulators—are paying more attention to getting culture right

By Jose Tabuena

July 23, 2016

The emerging flavor of the month in regulatory circles is the “culture of compliance” with recognition that corporate culture has a profound influence on how an organization conducts its business.

A culture that consistently places ethical considerations and client interests at the center of business decisions helps protect employees as well as investors and the integrity of the markets. Conversely, significant cultural failures can impose substantial harm on companies themselves including fines, penalties, and loss of reputation.

 

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Internal audit departments having trouble recruiting candidates with the requisite skills

By Karen Kroll

July 22, 2016

For the last few years internal audit executives have fretted over finding the right people to staff a department that is taking on several new roles. Now, it appears those concerns are only deepening. Among the top problems internal audit shops face is finding good people to hire.

"Companies are really struggling to find people with the skill set required for today's internal auditor," says Sandy Pundmann, U.S. internal audit practice lead at Deloitte.

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IIA Says Internal Audit Should Go Beyond Audits to Advising on Cyber-Threats

By Joseph McCafferty

July 20, 2016

There isn't a company out there, big or small, that doesn't have some concerns about cybersecurity. Some have called it the biggest problem of our time for companies. Given the potential for the types of disasters Target, Sony, and so many others have experienced, it's no surprise that internal audit has played an important role in ensuring that cybersecurity systems are in place and functioning.

Yet, that may not be enough. The Institute of Internal Auditors recently called on internal auditors to play a more significant role in protecting companies from hackers and data breaches. A new report, Internal Audit as Trusted Cyber-Adviser, outlines the steps heads of internal audit should take to become significant contributors to cybersecurity efforts.

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Study examines the top indicators that internal audit is functioning at a high level

July 19, 2016

A new research report from The Institute of Internal Auditors Research Foundation finds a wide variety of factors influence the maturity levels of internal audit functions around the world. The age and size of the internal audit function, industry type, organizational size, and other variables often influence how quickly internal audit functions can operate to deliver a high level of value. The study also found a wide disparity in how well audit departments are aligned with the overall strategic objectives of the organization.

The report identified 11 indicators of maturity, then analyzed how internal audit functions stack up against those indicators in seven key areas, such as risk assessment and internal audit planning.

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What Internal Audit Needs from the Audit Committee

July 18, 2016

As audit committees work to strengthen how companies approach risk management, corporate reporting, cybersecurity, and other key areas, they are relying on internal audit to provide more value, greater oversight, and better communication about issues of concern.

A new Common Body of Knowledge (CBOK) report from the Institute of Internal Audit provides six steps that audit committees can take to empower internal audit and better leverage the function to meet the organization's goals.

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New Transparency International Study Faults China Companies for Creating Conditions for Corruption

By Joseph McCafferty

July 15, 2016

A new report finds that the majority of large, multinational companies based in emerging markets, including China and Brazil, are falling down on their responsibility to provide transparent corporate reporting. The lack of clarity, says Transparency International which published the report, creates an environment that is ripe for corruption to fester.

In the latest edition of Transparency in Corporate Reporting: Assessing Emerging Market Multinationals, 100 of the fastest-growing companies based in 15 emerging market countries and operating in 185 countries around the world scored an average of 3.4 out of 10, where 0 is the least transparent and 10 is the most transparent. The average score fell slightly by 0.2 compared to the last time the survey was conducted in 2013.

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New report finds that the forces causing an overhaul of the internal audit role are just beginning to take shape

By Joseph McCafferty

July 13, 2016

If you thought that the upheaval in the internal audit profession and the rapid pace of change that has recast the internal audit function at many companies is starting to settle down, think again. A new report from Big Four audit firm EY finds that the transformation of internal audit is really just beginning.

While the EY report, “Are We Nearly There Yet?” focuses on financial services firms and their response to the Financial Crisis of 2007 and 2008, the underlying principles are affecting internal audit departments in several industries. And internal audit in financial services has acted in many ways as a leading indicator of what to expect in other industries as scrutiny by regulators and others increases.

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McKessy's departure likely to usher in a new era at the watchdog unit

By Joseph McCafferty

July 13, 2016

The first chief of the Securities and Exchange Commission's whistleblower office, Sean McKessy, announced that he is stepping down later this month. Depending on his successor, the office could become more aggressive in spurring whistleblowers to come forward and provide information about securities fraud and other wrongdoing at companies that fall under the regulator's whistleblower program.

McKessy has held the post since the office was established in February 2011 under the Dodd-Frank Act, and helped establish the whistleblower office that assesses and reviews all whistleblower tips received by the agency, evaluates whistleblower award claims, and makes recommendations to the SEC on whether claimants have satisfied eligibility requirements to receive an award.

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 A conversation with Shawna Flanders, president of Business Technology Guidance Associates

Interview By Joseph McCafferty

July 12, 2016

A patchwork of laws in the United States and abroad is making it difficult for companies to manage and transmit data across borders. Not only has the U.S. government been slow to enact federal law leaving companies beholden to a patchwork of 47 sets of data regulations from states and territories, but Europe is moving ahead with tougher data privacy laws, and other jurisdictions around the word are following suit.

Organizations are struggling to keep up with the complex set of global data privacy and security regulations, says Shawna Flanders, founder and president of Business Technology Guidance Associates and a senior instructor at MIS Training Institute. She says uncertainty about how the regulations will be enforced is also forcing companies to rethink their data governance policies and could impact how they collect and share information.

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Do you know who has access to your most sensitive data?

By Joseph McCafferty

July 5, 2016

What if access to our online bank accounts was managed the same way we manage access to information systems at work? Would we know who can get into our accounts? Who could see how much we have in what accounts? Who could take money out? Who could authorize other transactions? We probably would be much more careful about who has access and what they are cleared to do.

Many companies, however, still don't do a good job of governing the identity and access to systems that contain information just as important and sensitive to their organizations as our bank accounts are to us. According to Diana Kelley, executive security advisor at IBM Security, companies need to do a better job of identity governance and getting a handle on what individuals have access to just the information they need. She says roles need to be clearly defined and access limited to the data they need to do their jobs.

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While Internal audit and compliance have different objectives, they can gain much from working more closely together

Podcast

 

July 6, 2016

If it seems like the lines between internal audit and compliance are beginning to blur a little, it's because they are. Many companies are leveraging both functions to do more to assess risks and asking them to weigh in on all the things that could go wrong at a company from regulatory violations to strategic blunders. They are also calling on both functions to do a better job of communicating with each other and coordinating their activities.

In this podcast, Joseph McCafferty, head of audit content at MIS Training Institute, talks with Michael Volkov, CEO of law firm The Volkov Law Group and author of the Corruption, Crime, & Compliance blog, about the convergence of internal audit and compliance.

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Here are some things fraud hunters should never forget about the Madoff Ponzi scheme

By Joseph McCafferty

June 29, 2016

Corporate frauds are cyclical, meaning that they tend to come in waves, particularly when the markets perform poorly or a recession hits. (That is, when the scandals themselves aren't the actual cause of the recession as we saw in the financial crisis of 2008.)

These fraud waves have a pattern to them that is now familiar to most observers of Corporate America: A series of very similar frauds and schemes crop up devastating investors, employees, and pensioners and damaging the financial system itself. The judicial/enforcement system struggles to hold anyone responsible, managing a few scapegoats or forcing big companies to write checks they can cut without even having to check their account balances at the bank. Next, politicians and regulators hoot and holler and pass a series of laws to ensure that, “something like this never happens again.” About a decade or less passes and the process starts all over again. Lather, rinse, repeat.

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 A conversation with Tom O’Reilly, director of internal audit at Analog Devices

Interview By Joseph McCafferty

June 22, 2016

It’s an exciting time to be an internal auditor, according to Tom O’Reilly, Director of Internal Audit at Analog Devices. While many organizations are experiencing increased pressure to manage costs and are using new technology to change the way they do business, those trends are particularly magnified within internal audit shops. Internal audit must adapt, says O’Reilly, in order to continue to provide value to the business.

MISTI’s Joseph McCafferty sat down with O’Reilly at Audit World 2016 in Boston last week to discuss the latest trends impacting internal auditors, as well as some areas he suggests these departments should focus on to remain relevant and successful within their organizations.

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Part four of our series, Building the Modern Corporate Risk-Assurance Function

By Matt Kelly

June 21, 2016

Cybersecurity is unlike any other business risk because it isn't a risk at all. It's simply a new manifestation of all the business risks you already have.

That point may sound trite, but its implications are profound. Managing cybersecurity in a comprehensive, effective way will take audit and compliance executives well beyond their comfort zones. All the risk assurance efforts you build on the framework of the COSO cube and the strategy of the Three Lines of Defense will still exist, but in new mixtures and new forms. Much of what you do today will need to be re-imagined.

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June 8, 2016

The agenda has been released for the 2016 SuperStrategies conference taking place in Las Vegas from September 26 to September 30, and the focus of the event is how the internal audit profession is adjusting to address the changing risks that companies are working to manage.

Among the main sessions will be talks on how internal audit is now providing assurance on such areas as compliance, operations, strategy, and even culture. Speakers at the event will also look at how audit departments at leading companies are evolving to help tackle such major challenges as improving cybersecurity, uncovering fraud, and governing the growing stockpiles of data organizations are collecting.

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They say they are struggling to compile the needed data  and to implement policies to comply

By Joseph McCafferty

June 7, 2016

Just 10 percent of companies are prepared to adopt the new Financial Accounting Standards Board (FASB) lease accounting standards, according to a recent report by audit firm Deloitte. And it's not that many companies are just procrastinating; only 15 percent of respondents say they expect compliance to go smoothly when requirements begin kicking in as early as next year.

Respondents to the Deloitte survey say the top challenges to lease accounting implementation are collecting necessary data on all organizational leases in a centralized, electronic repository (33.3 percent); and instituting processes to evaluate quarterly adjustments for the balance sheet, as well as profit and loss statements (20.5 percent). The firm surveyed more than 5,400 financial and accounting professionals.

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A global survey of audit committee requirements finds increased oversight of audit processes

By Joseph McCafferty

May 31, 2016

U.S. regulators have expanded the role of the audit committee in recent years to oversee the hiring and performance of the external auditor in the hopes of improving audit quality. In many ways, the United States was just catching up with audit governance practices that were already common in Europe. A new survey, however, finds strong audit oversight by the audit committee is a concept that is taking hold around the globe.

The survey, conducted by the Board of the International Organization of Securities Commissions (IOSCO) and titled "Survey Report on Audit Committee Oversight of Auditors," seeks to identify audit committee practices that could improve audit quality at publicly listed companies.

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Market downturns have a way of exposing accounting frauds

By Joseph McCafferty

May 25, 2016

Warren Buffet, the king of folksy, one-liner investment aphorisms, has one for the problems that a bear market can cause: "It's only when the tide goes out that you can see who has been swimming without their trunks on."

For the last seven years or so, companies have been swimming in a rising market tide with only some minor ebbs and flows along the way. But we all know that bull markets don't last forever, and this one is likely running on borrowed time. So what should we expect when the stock market retreats? If history is any judge, expect a raft of accounting troubles and scandals.

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