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Around half the profession is now involved in environmental, sustainability and governance risks as formal disclosure becomes the norm.
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Internal auditors increasingly focused on ESG bottom line
01 May 2023
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Internal auditors have become increasingly focused on environmental, sustainability and governance risks over the past 12 months, the profession’s professional body says, as more and more stakeholders expect organisations to make their operations sustainable.
The trend was towards formal disclosure of ESG issues and associated auditing of these disclosures, according to members surveyed at the Institute of Internal Auditors-Australia’s recent annual conference.
About 40 per cent of chief audit executives said their internal audit function was involved in reviews of ESG matters and an additional 10 per cent reported it was likely to happen soon.
The CEO of the IIA, Peter Jones, said it was one factor involved in 83 per cent internal auditors saying the job was becoming more difficult and 89 per cent saying it had become more important over the past two years.
“Respondents cited skills shortages, working from home models and greater emphasis on efficiency as contributors to the increased difficulty,” Mr Jones said. “It was also noted that society is expecting a higher standard of performance from large organisations.”
Among those surveyed, 85 per cent said ESG auditing had become more important over the past 12 months and no one regarded it as less important.
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The top three issues were sustainability, health and safety, and internal controls and assurance.
Other ESG topics that internal audit functions examined included audit committee effectiveness, governance structures, and information and data governance.
Among neglected ESG topics were deforestation, animal welfare, shareholder rights and executive/board expenses.
High-profile governance failures were cited by participants as another reason internal audit had become more important along with the rapidly evolving nature of risk faced by organisations.
“It was also noted that society is expecting a higher standard of performance from large organisations,” the survey said.
The IIA surveyed around 80 internal auditors who attended a recent annual conference.
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