Fraud risk management, auditing IT, and business continuity management are ranked among the top areas which internal audit funtions need to improve, reveals the second "Mainland China and Hong Kong Internal Audit Capabilities and Needs Survey" conducted by business consultancy firm Protiviti.

Supported by the China Institute of Internal Audit, the survey garnered responses from 179 participants which include chief audit executives (CAEs), internal audit directors, managers and staff.

According to the survey, Fraud Risk Management (FRM) remains in the top five areas in need of improvement, indicating the continuous attention placed by respondents on anti-fraud activities. "As the global financial crisis proliferates globally, enterprises are facing greater financial performance pressure and employees are experiencing heavier personal financial burden - both provide significant incentives to commit frauds," says the survey, adding that  regulators are requiring enterprises to take a more proactive approach to managing fraud risk.

Proviti notes that, in many cases, fraud has led to business failures. These undoubtedly raise alarms on the significant impact of frauds on enterprises, resulting in enterprises increasing their efforts in anti-fraud activities. Internal auditors play a crucial role in these efforts to prevent and detect frauds, hence the high “Need to Improve” ranking for FRM.

Business Continuity

Business Continuity Management (BCM) is a new category of knowledge added to 2009’s survey and is ranked among the top five areas in need of improvement for obvious reasons. Protiviti says that the Wenchuan earthquake and South China snow storm in 2008 caused widespread suffering and enormous economic losses to enterprises. Wising up from these experiences, Chinese enterprises are paying closer attention to BCM. Past statistics showed that 93% of companies that suffered a significant data loss would be out of business within five years; furthermore, an outbreak of pandemic such as human influenza would result in staff absenteeism of around 25%-40%, disruption to supply chain, reduced customer patronage, and serious disruptions to lines of communications.