IIA-Australia says management must be more responsive to avoid corporate scandals
Sydney, 07 July 2022: Sydney: Almost half of organisations are not responding quickly to recommendations from senior internal auditors, according to research from the Institute of Internal Auditors-Australia (IIA-Australia).
IIA-Australia CEO Peter Jones said as was demonstrated during the recent Star Inquiry, if organisations fail to act on internal audit reports promptly, serious problems can arise for Boards, shareholders and regulators.
“The extent to which management responds promptly to internal audit recommendations is an indicator of the quality of internal control within an organisation,” Mr Jones said.
“A failure to act was highlighted as one of the core problems at Star and many of the other organisations besieged by similar failings; including The Crown inquiry, the Financial Services Royal Commission and many other large scale corporate scandals.”
The Star Entertainment Group senior management reportedly delayed a KPMG report into Anti-Money Laundering and Counter Terrorism finance (AML/CTF). The independent review carried out by KPMG in 2018 was part of the internal audit plan overseen by then Star Entertainment Group internal auditor.
IIA-Australia conducted a survey of around 150 delegates at their recent South Pacific and Asia Conference (SOPAC). While 55% of respondents said their recommendations within Internal Audit reports are always acted upon quickly, 45% said this was not the case.
Additionally, around one in ten internal auditors reports that they have been sanctioned in some way after submitting an unfavourable report to management or an audit committee.
“The structure of an organisation should be designed to minimise the potential for internal auditors to be subject to reprisal for reporting the facts. Sadly, it would seem that more than one in ten internal auditors has experienced an organisation where this has occurred.”
According to the survey, the role of the internal auditor has also become both more challenging and more important over the past two years.
Almost all Internal Auditors (88.2%) agree that their job has become more difficult over the past two years. A similar number (88.8%) said the work they do has also become more important. Working remotely, greater emphasis on efficiency and a shortage of skilled staff were said to be the main contributors to this issue. As one respondent said: “the kitchen conversations are where you can really get some ‘unofficial’ information, so this has been most challenging.”
“Although most of the anecdotal feedback stated that recommendations were actioned eventually, organisations need to ensure internal audit reports are fed through to the Board level in a timely way, even if the recommendations are not acted upon immediately.”
IIA-Australia is affiliated with The Institute of Internal Auditors which is the leading body representing internal auditors.
Globally, the Institute represents more than 200,000 members in 190 countries. In Australia, the IIA-Australia has a connection of nearly 7,000 assurance professionals inclusive of 3,000 members.