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International Financial Reporting Standards (IFRS) remain a concern for internal auditors, as the convergence of IFRS and U.S. GAAP will not be without its challenges, finds a new study from Protiviti.  

“Of particular concern to many is the fact that IFRS, as a principles-based approach, requires more discretion and judgment calls, as opposed to a rules-based concept such as U.S. GAAP where the lines are clearer around what can and cannot be done,” says Bob Hirth, Protiviti executive vice president and head of global internal audit.

The prevention and detection of fraud once again emerged as a key concern of internal auditors, with related standards and guidance from The Institute of Internal Auditors ranking as top “Need to Improve” areas.

The study also finds that risk management is a top priority for board members and executives, making it vital for internal auditors to increase their focus in this area, particularly the identification of potential future risks as well as risks tied to the business strategy. 

“A strong internal audit function is critical to operating successfully and maintaining a state of effective internal control in a heightened regulatory and risk management environment,” says Hirth.

According to the study, even as risk management consumes more of internal auditors’ time, these professionals still don’t feel prepared to meet the demands triggered by the spate of new regulation. Understanding “emerging risks” was ranked by survey respondents as the top “Need to Improve” item in the area of risk management and governance process, followed closely by “evaluating and changing risk appetite levels.”

Building expertise in technology-enabled auditing, including continuous auditing and computer-assisted audit tools, also remains a top priority for internal audit professionals.

According to Hirth, developing expertise and successfully implementing automated auditing tools and processes will enable internal auditors to focus on such higher-level initiatives as emerging risks – including new regulation, changes in the business model, changes in industry dynamics, and industry competition, among many other factors – and risks tied to the company’s strategy.

With regard to “soft” skills, internal auditors rate “dealing with confrontation” and “public speaking” as the areas in which they most would like to improve. These skills have ranked among the top areas for development for the past three years, a nod to the fact that internal auditors are assuming more strategic roles and working closely with most departments in their organisations.

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