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Rise in Demand for More Value From Internal Audits

Internal audits of social media activity is important in the modern enterprise

Recent studies suggest the opportunities and demand for internal audits continue to persist, as more corporations seek to reduce risks and identify unique sources of value and insight for decision makers. Rather than laying victim to market fluctuations and other external factors, companies are learning from the economic downturn and working to proactively combat a variety of risks that could be avoided through wise decision making and adjustments to daily behaviors.

Through the deployment of regular, thorough internal audits, business leaders hope to find useful insight into the ways enterprises can reduce risk while also driving performance and surpassing competitors in cost-efficient ways. To achieve these endpoints, however, internal audit functions must be more sophisticated to meet the demands of a complex political and regulatory-based marketplace. Internal audits must continually evolve to prove useful in the risk management sector of the company as external factors change over time.

Does your company's internal audit functionality offer meaningful contributions to business planning and strategy? What aspects of internal audits fail to meet expectations?

Enhance internal audit capabilities
According to the PwC US Internal Audit State of the Profession 2013 survey, 80 percent of business leaders feel threats to business performance and safety are increasing, yet just 12 percent are confident in their organization's current risk management strategies. Sophisticated internal audits must aggressively increase reach and capabilities to offer value to business decision makers looking to support major moves with statistical evidence. Internal audits must now play a greater role in aligning stakeholder expectations with critical risk protections, pushing the impact of internal audits into new areas of the business. Board members often fear critical risks more than management, and thus must be reassured that internal audits are proactively combating these threats on a regular basis.

"There must be clear understanding and alignment of stakeholder expectations, alignment of internal audit focus on the highest risk areas and alignment of internal audit capabilities to the needs of today and those emerging needs of tomorrow," said Jason Pett, internal audit services leader for PwC. "Only then can internal audit contribute to the organization in a way that establishes relevance and value in the eyes of all key stakeholders."

Don't ignore social aspect of audits
Research from Protiviti found many companies lack social media policy and processing, which is exposing organizations to preventable risks. Internal audit professionals must prioritize social media, fraud risk and data analytics tools as areas where functions can be improved to reduce a new breed of critical risk areas. The research revealed:

  • 43 percent of internal audit professionals have no social media policy in place, and those that do fail to address very common concerns
  • 30 percent of companies fail to cover information security and approved social media applications in audits

  • 51 percent of organizations do not address social media in risk assessment processes
  • 45 percent have no plans to add social media to this year's audit strategies

  • 84 percent of companies that do consider social media in audits consider the technology as not or moderately effective, underestimating the risk threats of the medium

According to Brian Christensen, executive vice president for global internal audit at Protiviti, internal audits are responsible for systematic scrutiny of business processes and reporting on the findings in real time to keep decision makers informed and ahead of serious threats. Inefficiencies or gaps in internal audit functionality will expose companies to costly risks.

"The survey findings are surprising in that they show how many businesses are either inadequately prepared or altogether inactive in putting effective processes and policies in place around social media," Christensen said. "From a risk management perspective, this poses significant potential problems for businesses that can range from reputational risk to IT infrastructure risk as a result of unchecked exposures to customer, vendor and company information."