Internal audits are integral for accounting for nonprofits, but the state of the internal audit profession is shaky. According to a Deloitte study, only 13 percent of Chief Audit Executives (CAEs) are “very satisfied” that their functions have the skills to meet stakeholder expectations. Only 28 percent believe that their internal audit functions have a strong impact and influence on their organizations.
There are many challenges in nonprofit accounting audit services, specifically in the realm of internal audits. The dissatisfaction with the internal audit function stems, in part, from a lack of qualified candidates for internal audit positions.
Major colleges and universities rarely, if ever, offer majors in internal auditing, with new graduates entering the internal auditing field with degrees in general auditing or taxation. While both are valuable degrees, neither is an exact fit for the needs of internal auditing. Students must learn on the job and work their way up the ranks of the internal auditing team. But if senior internal auditors have too much on their plates, or retire before new entrants are hired, knowledge and skills aren’t passed along.
Internal Audit at the Crossroads
It’s no surprise, then, that Deloitte’s report entitled Internal Audit at the Crossroads indicates that the entire Internal Audit function stands at the crossroads between past and future, historical functions and evolving needs. Once seen as the guardians and interpreters of past history, CAEs know that the demand for their services is now in the realm of predictors of the future, not people who look back. The trick lies in how to transition to the past and future of internal audits.
The Evolving World of Internal Audits
Key stakeholders such as the audit committee and the executive team must support the Internal Audit’s desire for change. The world of Internal Audits is changing to keep pace with stakeholder demand, but stakeholders must also be open to the new role that Internal Audit can play within a nonprofit.
Most CAEs surveyed by Deloitte know they need to change. About 85% know that their organization is likely to undergo moderate to a significant change in the next three to five years. Around 77% anticipate that Internal Audit must change to meet that demand. But how do you move to the next step?
Key Findings and Action Steps
The Deloitte report is, of course, only one among many to peer into the mind of CAEs and examine the role of Internal Audit. Among the key findings of this report are:
- Internal Audit needs and desires more impact and influence within their organizations.
- Skills and educational gaps must be addressed. This may be done at the organizational level or within regional groups that can influence higher education organizations, industry groups, and others who provide education and professional development.
- Demand for dynamic reporting will increase.
- Use of alternative resource models will expand.
Alternative resource models include working with nonprofit accounting audit services, outsourcing nonprofit accounting services, flexible working arrangements to add skilled Internal Audit specialists to teams, and working with independent consultants to fill specific needs within projects. Outsourcing internal audit functions to a specialized nonprofit accounting firm such as Beck & Company makes excellent sense in light of the challenges presented in the Deloitte report.
Change is inevitable, and smart nonprofit organizations embrace, rather than fight, change. The role of Internal Audits is ever-changing and is expected to undergo major changes in the next three to five years. Will you be ready?
Nonprofit Accounting Audit Services from Beck & Company
Nonprofit accounting audit services are available from Beck & Company. If you need to fill gaps within Internal Audit teams, need support for CAEs, or seek experienced nonprofit accounting specialists, Beck & Company can help. Beck & Company are Washington DC nonprofit advisors. We also are Virginia certified nonprofit accountants. We work with nonprofits of all sizes serving many different constituents nationwide, providing a variety of consulting, auditing, and accounting services. For more information, please contact us at 703-834-0776 x 8001.