The changing face of the internal auditor. (The Shape of Things to Come).

IN JUNE 1999, THE BOARD OF DIRECTORS of the Institute of Internal Auditors approved a new definition of internal auditing and set in motion a series of events to change the way we look at internal auditors. This definition has changed internal auditing from a reactive, compliance-focused, and after-the-fact review, to a process that is proactive and future-focused, and which provides a wide variety of services that capitalize on practitioner knowledge, skills and experience.

The change expands the scope of internal auditing from primarily assurance to include consulting services. Assurance services are designed to provide objective examinations leading to an overall opinion statement as to acceptability of a process. Typical services include: financial accuracy, contract compliance, regulatory/legal compliance, policies/procedures compliance, or operational meeting of performance standards (e.g., ISO). In the future, the internal auditors will aggregate individual assessments into an overall opinion of the organization's compliance with various financial, legal, and operational requirements. These services will help meet management and the audit committee requirements by regulators and stakeholders to be more accountable for the basic activities of the business through proactive statements in external documents.

Consulting services provide a new range of utilization for the skills in the internal audit department, including advice (opinions on alternatives), counsel (e.g., best practices), problem solving, participation in reengineering of processes, involvement in new system development (computer-related), etc. Consulting services enable management to use internal resources to assist in resolving issues with an emphasis on the continuity of follow-up, which is critical to the internal audit process.

With the current and imminent technological advances and inherent risks, directors and audit committee members of the future will, no doubt, take comfort in the knowledge that the internal audit profession has expanded to meet the challenge. It is, indeed, an exciting time to be an internal auditor.

David A. Richards, CIA, CPA, is manager of the Internal Auditing Department for FirstEnergy Corp., a $7 billion-a-year investor-owned electric, gas, and facilities services company which serves more than two million customers in central and northern Ohio and western Pennsylvania. He is the 2001-2002 chairman of the board of the Institute of Internal Auditors. As the IIA's highest elected official, Richards presides over the international board of directors, executive committee, and nominating committee, and serves as the chief spokesman for the internal audit profession.