Protiviti: SOX shock is over

A survey by internal audit and risk advisors Protiviti finds that for the first time since the Sarbanes-Oxley Act went into effect in 2002, a growing number of internal audit departments are returning to business as usual.

Having been consumed with Sarbanes-Oxley compliance projects for the past four years, 24 percent of companies report their internal audit departments have achieved “rebalancing” — a renewed focus on their traditional responsibilities that is balanced with compliance activities. This number is more than double the response (10 percent) from a similar survey conducted in 2005 by Protiviti …

The report, “Moving Internal Audit Back Into Balance” was done from October 2006 through January 2007, when the first wave of companies reached the third year of Sarbanes-Oxley compliance. In case you forgot, SOX was Congress’ response to the collapse of Enron, Worldcom et al.

“This process of rebalancing is tied closely to the development of a more efficient and sustainable approach to compliance, which is why it takes time to achieve,” said Bob Hirth, managing director for Protiviti and head of the company’s global internal audit practice. “However, as the results of our second rebalancing survey indicate, significant progress has been made. Companies clearly are seeing the long-term benefits of rebalancing, which include ensuring they do not focus solely on financial reporting at the expense of other critical business operations and functions.”

This isn’t exactly a surprise. There are always new rules and regulations that come down the pike (although SOX was pretty darn big) for companies to adjust to. In an interview we did with El Paso CEO Doug Foshee a couple of years ago he said “We are a better company today for having gone through the process.”

And in a recent Q&A Ernst & Young’s Charles Swanson said the external audit community has caught up with the demand SOX created and is moving on to the next challenge.

Some of the findings in Protiviti’s Internal Audit Rebalancing survey:

* 47 percent of internal auditrs cited “being able to perform more traditional audits” as the top benefit derived from rebalancing. This was greater than the combined response for the next three benefits, including “more appropriate coverage of risk,” which was the top-ranked benefit in the previous survey.
* Rebalancing gains momentum quickly. Once they initiated efforts, 45 percent of companies took about one year to achieve rebalancing, while 28 percent required less than one year.
* Rebalancing strategies continue to evolve. The three rebalancing strategies most widely employed among internal audit departments are: reducing the total number of controls (45 percent), reducing the number of key controls (37 percent), and increasing reliance on internal audit by external auditors (34 percent).
* Internal auditors have kept it in-house. A majority of organizations made limited use of external assistance in their rebalancing efforts (43 percent), while some used none at all (27 percent). In most cases, outside consultants were relied upon by some organizations until additional internal audit professionals were hired.

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