From the President's Study

In January, during the American Accounting Association, Auditing Section's Midyear Meetings in California, I had the pleasure of introducing The IIA Research Foundation's landmark research report - Research Opportunities in Internal Auditing (ROIA). This report represents some of the best thinking from leading academicians on areas that will affect the future of our profession. It also addresses our profession's growing responsibilities as well as the increased recognition that recent corporate governance initiatives have provided.

The report recognizes that a new generation of researchers and students is becoming interested in the internal audit profession. The book was edited to appeal to this audience and to influence the thinking of other academics, practitioners, business leaders, standard-setters, policy makers, regulators, students, and the general public. The Foundation also plans to align its research priorities with those identified in ROIA. You can read ROIA by downloading it free from www.theiia.org. A related article in this RF Report tells you more about ROIA.

The Foundation remains committed to advancing understanding of internal auditing's state-of-the-art practices, trends, and fundamental issues, so that people can make better decisions about our activities.

As we look forward to 2003 and beyond, we face several major challenges. We must find ways to support both basic research and applied research. Are we up to it? We have to be! Both types of research are needed to build the bridges to the next level in our profession. And we need your support to make that happen.

Internal auditing is a global profession and our mission must remain focused on unique (and cost-effective) ways to address global developments in internal auditing.

Last June, The Foundation's Board of Trustees voted to fund a project that will focus on governance issues in Australia and New Zealand. This is the first project that we have funded jointly with an IIA affiliate (IIA-Australia) and a university (RMIT University). This effective partnering allows us to leverage our scarce resources while benefiting from the end result – a quality research report with global appeal. If your organization or affiliate wants to enter into a similar arrangement with The Foundation, we want to hear from you.

Currently, The Foundation is pursuing these commitments to the profession:

1. A major funding initiative that will commit approximately US $1.25 million to internal audit research over the next five years,
2. Development of a comprehensive database describing the practice of internal auditing,
3. Development of a structure that allows us to share research results with IIA affiliates on a global basis, and
4. Continued funding of short-term state-of-the-art research that affects the practice of the profession. Projects in progress and new Research Foundation projects are featured in separate articles.

In spite of the day-to-day pressures of performing our jobs, we need to take the time to think about why things work, why they don’t, and suggest ways to make things better.  That is the ongoing challenge of research.

We are fortunate to have developed rapport with leading practitioners, academics, and researchers who can help us remain committed to the profession. Our Board of Research Advisors and the Board of Trustees comprise dedicated individuals who believe in the importance of timely research. And we are grateful to you, our loyal supporters – individual, corporate, and affiliate contributors; Master Key and Heritage Club members; and IIA staff and volunteers. Please keep your support coming so we can accomplish the initiatives you read about here, and so much more.

I would be remiss in closing without recognizing the outstanding contribution of Basil Pflumm to internal audit research. Basil will retire as executive director of The Foundation in July. He has been the heart and soul of the Research Foundation for many years, and we have benefited from his uncanny ability to understand good research and apply it to benefit the profession. He was a leader in encouraging The Foundation to look at internal audit competencies and insisting that The IIA revise its definition of the profession and approach to providing guidance based on our research. He has always encouraged the profession to move forward and understands the importance of research in helping it move in the right direction. Basil, you will be missed!

Sawyer's Legacy Keeps on Giving

Even in memoriam, Lawrence B. Sawyer, JD, CIA, PA, continues to give back to the profession in which he was revered as “the father of modern internal auditing.”

The Sawyer estate recently directed The IIA to donate the royalties from Sawyer's Internal Auditing, Fourth and Fifth Editions to The Foundation with a portion of the funds earmarked specifically for the Esther R. Sawyer Scholarship Award Fund.

Research Opportunities in Internal Auditing

Edited by Andrew D. Bailey Jr., Audrey A. Gramling, and Sridhar Ramamoorti

Recent scandals in corporate America and the plunging stock markets have prompted the U.S. Congress to unleash sweeping regulatory and corporate reform legislation. In the past, crises of this nature did not focus on the role of internal auditing. Today, people are looking to the internal audit function and the chief audit executive as part of the solution to a perceived breakdown in the systems of business reporting, internal control, and ethical behavior. 

To understand the ramifications of the new corporate governance environment and the opportunities it presents, 10 respected academics wrote on the past, present, and future of internal auditing and outlined key questions that collectively present an ambitious research agenda.

Chapters cover:

1. Internal Auditing: History, Evolution, and Prospects
2. Internal Audit and Organizational Governance
3. The Internal Audit Function: An Integral Part of Organizational Governance
4. Assurance and Consulting Services
5. Auditing Risk Assessment and Risk Management Processes
6. Managing the Internal Audit Function
7. Independence and Objectivity: A Framework for Research Opportunities in Internal Auditing
8. Internal Auditing's Systematic, Disciplined Process

ROIA represents the first step in The IIA Research Foundation's commitment to thought leaders in the academic community. The Foundation hopes that the report will foster research on important issues of interest to the public and the internal audit community and intends to fund future research based on projects inspired by this work . Download ROIA free from www.theiia.org.

RF's Executive Director Announces Retirement

Basil Pflumm, CIA, The IIA's  vice president of the Global Practices Center, and The Foundation's executive director, will retire in July. He has been a key member of The IIA staff since 1989. Looking back, Pflumm believes that the Competency Framework for Internal Auditing was one of The Foundation's most influential projects during his tenure, since it not only provided the first global assessment of internal auditing but also fueled The IIA's new definition of internal auditing and the creation of the Professional Practices Framework.

"I have always been impressed by The Foundation's constant readiness to perform research for The IIA and the profession and its outreach to the internal auditors of tomorrow," Pflumm explained.

"From the issuance of the Systems Auditability and Control (SAC) report, to its US $250,000 donation to increase Endorsed Internal Auditing Programs worldwide, The Foundation always manages to serve the profession at the most appropriate points in time. A prime example of this is its current initiative on governance and risk management, including the 34-page assessment guide, which compares and contrasts key requirements of Sarbanes-Oxley, the SEC, and U.S. stock listing exchanges. This document has already been downloaded more than 50,000 times," he added.

Pflumm vows to continue to support The Foundation and adds that he "will miss the volunteers and IIA headquarters' staff who make The Foundation's dreams become reality."

2002 International Conference Hosts Issue Challenge

The sponsoring chapters of the 2002 International Conference, held last June in Washington, D.C., recently donated US $35,000 to The Foundation. The Washington, D.C., Baltimore, and Northern Virginia Chapters requested that the proceeds from the conference be earmarked for the Roth/Espersen research on The Internal Auditor's Role in Corporate Governance (see article, following). According to Conference Chairman William Taylor, “We support The Foundation 110 percent, and encourage the hosts of upcoming International Conferences to follow suit.”

The next issue of RF Report will include an interview with Taylor and additional details on this generous example of "Progress Through Sharing."

The Internal Auditor's Role in Corporate Governance

This research report, by James Roth, Ph.D., CIA, CCSA, and Donald Espersen, CIA, covers the variety of roles internal auditors play in corporate governance.  The primary focus is on what internal auditors are doing to help their companies meet the new U.S. listing requirements. The study addresses issues such as balancing the conflicting needs of audit committees and management, and finding the resources to do more with governance. The research is primarily for publicly held companies but the principles can also be applied to all public and private sector organizations.

This report represents The Foundation's commitment to using alternative distribution methods to deliver timely information to its customers. While the finished research will be offered through The IIA Bookstore, several tools gathered during this project are available now on www.theiia.org including an Implementation Guide to Section 302 - CEO/CFO Certfication of Disclosure Controls, El Paso Internal Control Assessment Survey (which was downloaded more than 22,000 times in January alone), an audit committee charter issue matrix, and a sample audit committee charter. These tools supplement The Foundation's Assessment Guide for U.S. Legislative, Regulatory, and Listing Exchanges.

Projects in Progress

The Foundation hopes to publish reports in these internal audit subject areas in 2003:

1. Privacy: Assessing the Risk
   Projected publication date: first quarter 2003.
2. The Role of Internal Auditing in Corporate Governance and Management in Australia
   Projected publication date: second quarter 2003.
3. Internal Audit Use of Continuous Auditing
   Projected publication date: third quarter 2003.
4. Electronic Commerce Systems: Control and Risk Analysis
   Projected publication date: fourth quarter 2003.

Recently Completed Projects

A Balanced Scorecard Framework for Internal Auditing Departments

Internal auditing's changing mission, roles, and strategies have led departments to rethink and refine their strategy and performance priorities. The balanced scorecard is an effective tool for fine-tuning and implementing strategy and for showcasing the value of an internal audit department. This book, by Mark L. Frigo, Ph.D., can help you refine and translate your departmental strategy into positive action using a balanced scorecard framework.

96 pages, order number 414
IIA member price US $50; nonmember price US $65

Enterprise Risk Management: Pulling It All Together

This new report examines the role of internal audit in implementing Enterprise Risk Management (ERM) in five different types of organizations: electric utilities, manufacturing, retailing, oil and gas operations, and the public sector. This groundbreaking research report, authored by Paul L. Walker, Ph.D., William G. Shenkir, Ph.D., and Thomas L. Barton, Ph.D., demonstrates how ERM can help organizations focus the efforts of employees on the most important issues and boost shareholder value.

163 pages, order number 456
IIA member price US $100; nonmember price US $125

Mergers, Acquisitions, and Divestitures: Control and Audit Best Practices

This research examines current practices employed by internal audit departments in support of mergers, acquisitions, and strategic alliances. The researchers Georges M. Selim, Ph.D., FIIA (UK), Sudi Sudarsanam, Ph.D., and Michael K. Lavine, CIA, targeted the challenges to the control processes that emerge as different business cultures are blended into one entity. The research also examines the participation of internal audit departments in organizing, staffing, reporting, and monitoring the business combination activities.

125 pages, order number 464
IIA member price US $100; nonmember price US $125

Research Opportunities in Internal Auditing

(Read about this publication above)

2002-2003 Contributors

Many corporations contributed to The Research Foundation in 2002 and 2003. These contributions will help The Foundation to fund research projects, sponsor forums and symposiums, award research and doctoral dissertation grants, and assist internal audit educational programs in colleges and universities.

The Foundation also expresses its appreciation to the Alfred P. Sloan Foundation for its grant in support of research on Strengthening Auditor Roles in State and Local Government Performance Measurement.

Corporate contributions are generally made in four categories (all in US dollars):

                  Chairman's Circle         $5,000 and up
                   Trustee's Circle           $3,000–$4,999
                   Supporter                    $1,000–$2,999
                   Donor                          Up to $1,000

Individual contributors can also increase the value of their contribution to The IIA Research Foundation through a corporate matching gifts program. The Foundation is a not-for-profit 501(c)(3) corporation operating exclusively for research and educational purposes. As such, it may be eligible for matching and sometimes doubling grants under many corporate contribution programs. If you are employed by an organization that has a matching gifts program, you can send your organization's matching gift application form along with your contribution.           

Enter into the Heritage Circle

Gifts funded through estate planning and bequests are critical to the future programs, activities, and operations of The Research Foundation. By naming The Foundation in your will, or by designating it as a beneficiary of other planned giving instruments, you will become part of The Foundation's Heritage Circle.

Recently, Michael S. Raphael, CIA, an IIA member for 37 years, submitted a bequest to The Foundation. According to Raphael, "I have been an internal auditor for more than 40 years and have witnessed firsthand the value that The Foundation has within the profession. The Foundation is the branch of The Institute that utilizes its resources to help us work smarter, to be alert to changes within the profession and know how to respond to them, and to help management understand the value we add. Therefore I felt that including The Foundation in my will was the appropriate way to show my gratitude."

To learn more about the Heritage Circle, visit The Research Foundation section of www.theiia.org.

Your Support is "Key" to Our Survival

The Foundation's Master Key Program was designed to help The Foundation fund quality research studies and educational programs for internal auditors worldwide. For an annual tax-deductible contribution of US $1,000 or more, your organization will receive the most current Foundation publications and reports as soon as they are available (both printed and online). 2003 Master Key subscribers will receive publications and reports including:

• Research Opportunities in Internal Auditing
• Internal Auditor's Role in Corporate Governance
• Privacy: Assessing the Risk
• Internal Audit Use of Continuous Auditing
• Electronic Commerce Systems: Control and Risk Analysis
• Systems Assurance and Control (SAC) - CD

These online resources are also included in the Master Key Series:

• Assessment Guide for U.S. Legislative, Regulatory, and Listing Exchanges: Requirements Affecting Internal Auditing
• Internal Auditor's Role in Corporate Governance

For more information on the Master Key Program, go to the Research Foundation section of www.theiia.org.

About Our Foundation

The Research Foundation is the recognized leader in sponsoring and disseminating research to assist and guide internal auditing professionals, business and government communities, and the general public in the areas of audit practices, risk management, controls, and governance.

Founded by The Institute of Internal Auditors in 1976, The Foundation has set the standard for professional achievement in the internal auditing profession. 

Contributions to The Foundation are tax-exempt under Section 501(c)(3) of the U.S. Internal Revenue Code. Operating exclusively for research and educational purposes, The Foundation pays no taxes on earnings or contributions received. In turn, when U.S. individuals or organizations contribute to The Foundation, their contributions are deductible under Section 170 of the U.S. Internal Revenue Code. To learn more about The IIA Research Foundation, visit www.theiia.org.