Question

Task
Internal Audit Must Embrace Change or Sink Like a Stone
On March 21, 2019 By Jason Mefford
Here’s a list of the internal audit challenges that present threats to the profession or cause
sleepless nights for some CAEs. While it’s hardly a comprehensive list, it includes some of the
changes and trends that we internal auditors simply can’t ignore.
Speed of Technology: Changing business models from technological advances are disrupting
traditional organizations and just may be the existential threat to internal audit. Deeper knowledge
and skills related to new technology used throughout the organization are needed, as well as
understanding and adoption of technology tools for performing audits, such as robotic process
automation (RPA), artificial intelligence (AI), and advanced analytics. As Karl Stingily, CAE of
Caesars Entertainment said, “every auditor needs to have a basic understanding of IT, as it is
embedded in every audit that we perform.”
Cybersecurity: Cybersecurity is a critical issue for nearly all boards and senior managers, and,
whether you know it or not, they are looking to internal audit to make sure everything is “OK.”
Since cybersecurity is such a broad topic, and little direction is given on what internal audit is
expected to do, scoping engagements is difficult.
Downgrades to the CAE Position: Some organizations are pushing down the CAE position from
vice-president to director or from director to manager, leaving internal audit to report lower in the
organizational hierarchy. This is bad news if internal audit is to maintain influence in the
organization. This harsh reality increases the need for internal audit to demonstrate value to senior
management and the board, audit what matters most, and simply make the case for internal audit
by achieving more “wins.”
More Specialization: Increased technical and business skills are needed in internal audit, leading
to the death of the general auditor. Internal audit departments will likely see more experienced,
technically savvy auditors making up most of the department.
Serving Two Masters: Internal audit has always had some challenge serving both the board and
senior management—two groups that are not always aligned—and pull internal audit in different
directions. The challenges around independence are real.

Talent Acquisition: Finding enough people to fill open positions and finding people with the
right skills is a challenge in the current tight job market and could be for some time. CAEs will
need to be more creative, looking for candidates with non-traditional audit backgrounds and
relying more on “guest auditors” to fill the gaps.
Talent Development: Training current employees in technical and soft-skills is a constant
challenge for CAEs. And soft-skills, such as communication and emotional intelligence, are more
important than ever. Auditors who can do the work, but have difficulty communicating the
results, will find themselves out of a job.
Constant Justification: Nobody seems to care that last year you saved the organization millions
of dollars. The “what have you done for me lately?” mentality requires CAEs to constantly justify
their value to the organization, some of which is cost and risk avoidance that is difficult to
calculate and quantify to the chief financial officer. Yet CAEs will need to prove return on
investment to the organization or risk getting outsourced.
Sarbanes-Oxley: Immediately after the passage of the Sarbanes-Oxley Act (SOX) internal audit
spent an inordinate amount of time doing lower-level work around SOX compliance. Over time,
some of that work transitioned to others in the organization, but new requirements from the
PCAOB, which have led to shifting expectations of the board and senior management, means
internal audit is being pulled back, kicking and screaming, into SOX compliance work.

Requirement:
1. Above article is about the changes and trends that are challenges encountered by internal
auditors.
You are required to critically evaluate the challenges faced by internal auditors.
(Support your answer by quoting practical instances)
(Word limit – 700 words)
2. “Every auditor needs to have a basic understanding of IT, as it is embedded in every audit that
we perform.” — Karl Stingily, CAE of Caesars Entertainment.
Analyze the positive impact created by information technology on the performance
of internal audit.
(Word limit – 700 words)
3. “Effective internal control, internal audit, audit committee and corporate governance are all
inter-related. “
Evaluate how this interrelation contributes to the effectiveness of internal audit and
overall organizational success.