About 40 percent of audit departments with insurance firms and other industries have been able to decrease the amount of time devoted to federal financial reporting law requirements since new rules and guidance were put in place, a survey has found.
The study results concerning company activity related to the 2002 Public Company Accounting Reform and Investor Protection Act (Sarbanes-Oxley) were announced by Menlo, Calif.-based Protiviti, an internal audit and risk consultant.
New rules and regulations pertaining to Section 404 of Sarbanes-Oxley were issued in May of 2007 by the Public Company Accounting Oversight Board and U.S. Securities and Exchange Commission.
According to the study, approximately four in 10 internal audit departments have been able to decrease the amount of time devoted to Sarbanes-Oxley compliance activities since the new guidance and standard were announced.
Protiviti said as a result of the time saving, company audit units are increasing their efforts to "rebalance" toward both more traditional internal audit responsibilities that include regulatory compliance as well as being strategic business advisors to senior management and the board's audit committee.
The findings are contained in Protiviti's study titled "Moving Internal Audit Back into Balance," which surveys and analyzes how organizations are shifting internal auditing responsibilities away from a primary focus on Sarbanes-Oxley compliance to a broader scope of activities.
The survey, conducted earlier this year, involved 321 internal audit professionals, 12 percent of whom were in the insurance sector. It is viewable online at www.protiviti.com/rebalancing3.
Bob Hirth, executive vice president and global leader of Protiviti's Internal Audit practice, said, "The great news here is that the SEC's interpretive guidance and PCAOB Auditing Standard Number 5 are having their desired effects.
"Without question, companies have been investing a tremendous amount of time on Sarbanes-Oxley compliance, particularly in the first years after the law went into effect."
The survey findings, he said, "indicate that as a result of the new information from the SEC and PCAOB, companies are establishing a more finite number of controls, thus enabling them to reduce the time spent on compliance and then shift, or rebalance, their focus to other key areas in the organization."
Protiviti said survey results also confirmed that external auditors are increasing their reliance on the work of a company's internal auditors, as PCAOB AS5 allows.
Mr. Hirth commented that this change "is another positive development in helping organizations streamline the compliance process around Section 404 and internal control over financial reporting."
Other key findings from Protiviti's 2008 Rebalancing Study include:
o The most common activity related to rebalancing is rescoping workloads within the internal audit department, with a three-year trend indicating that rather than hire new resources, more organizations are rescoping workloads.
o Similar to the results from last year's study, one in three companies report that rebalancing is underway, and approximately one in five companies report having achieved rebalancing.
o The benefit of rebalancing cited most frequently by respondents was "internal audit being able to perform more traditional audits." Also ranking highly was "more appropriate coverage of risk." Executives see the importance of shifting the focus of the internal audit function back to broader responsibilities, providing them with higher confidence that the internal audit function is improving the organization's overall risk management efforts.
o Companies reported that efforts to reduce the total population of controls as well as the number of key controls exceeded significantly what was planned last year.
Protiviti said additional information on the SEC's updated guidance regarding Section 404 compliance and the PCAOB's Auditing Standard No. 5 are online at http://www.protiviti.com/.
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