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Internal Auditing 2013: Key Trends in the Profession

and Update on The IIA

Richard Chambers President and CEO – The IIA

February 25, 2013

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Overview • Pulse of the Global Profession • IIA By the Numbers in 2013 • Key HQ Initiatives in the Past Year • On the Horizon for 2013 • Other Issues Warranting Attention

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The Global Internal Audit Profession in

2013

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• Conducted February 2013 – 5th Consecutive year – 37% $1B or more – 63% Public/private

companies

• 1700 Responses

– 74% internal audit managers or above

– 63% CAEs

• Geographic Distribution – 33% North America – 29% Europe – 17% Latin America – 9% Asia Pacific – 9% Africa

2013 Global Survey Demographics

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The Outlook for Global Internal Audit Resources is Strong • Budgets:

• Staffing:

Increase Stable Decrease Overall 33% 55% 12%

Change from 2012-2013

Increase Stable Decrease Overall 22% 69% 9%

Change from 2012-2013

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

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The Outlook for Global Internal Audit Budgets by Region

+39% - 10%

+48% - 3%

+47% - 7%

+19% - 14%

+47% - 10%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

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The Outlook for Global Internal Audit Staffing by Region

+23% - 5%

+24% - 4%

+20% - 6%

+17% - 10%

+22% - 6%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

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Fraud 5% Operational

28%

Financial – 21% Compliance

14%

Strategic/ Business 5%

Other 11% Risk Mgt Assurance 7%

IT – 9%

Distribution of Typical Internal Audit Coverage in 2013

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

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Distribution of Typical Internal Audit Coverage in 2013

OP - 27% FIN – 27%* COMP – 15%

OP - 29% FIN – 19%

COMP – 13%

OP - 27% FIN – 19%

COMP – 14%

OP - 31% FIN – 15%

COMP – 14%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

* Inclusive of Sarbanes-Oxley work

OP - 29% FIN – 18%

COMP – 12%

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Analytical/critical thinking 72% Communication skills 54% Risk management assurance 44% IT (general) 41% Data mining and analytics 37% Accounting 33% Industry-specific knowledge 32% Business acumen 29%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

Requisite Skills For Internal Auditing Continue to Evolve

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CFO – 21%

Other 14%

Internal Audit Administrative Reporting Relationships

CEO – 43%

AC – 9%

BOD – 8%

Chief Compliance Officer– 1.5%

General Council – 3%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

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Internal Audit Administrative Reporting Relationships

CEO – 33% CFO – 37%

CEO – 51% CFO – 12%

CEO – 56% CFO – 22%

CEO – 50% CFO – 13%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

CEO – 52% CFO – 12%

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Other 10%

Internal Audit Functional Reporting Relationships

CEO – 18%

Audit Committee – 54%

Full BOD – 12%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

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Internal Audit Functional Reporting Relationships

AC – 73% Full BoD – 3%

CEO – 10%

AC – 37% Full BoD – 20%

CEO – 28%

AC – 77% Full BoD – 2%

CEO – 11%

AC – 41% Full BoD – 21%

CEO – 28%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

AC – 62% Full BoD – 7%

CEO – 21%

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Operating Management 20% CEO 12% CFO 12% Legal or General Counsel 5% Full Board of Directors 4% Audit Committee 4% Chief Risk Officer 4% Chief Compliance Officer 4%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

Have Any of the Following Ever Attempted to Unduly Influence an Internal Audit Report?

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Report To: Percentage

Audit Committee 52% CEO 19% Full Board of Directors 18% CFO 1% Legal or General Counsel 1% Other/Unsure 9%

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

22% of Respondents Believed Internal Audit Would Be More Independent if It Reported to:

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Other Global Trends Worth Watching in 2013

Source: The IIA Audit Executive Center

• Internal audit focus by global Financial Services regulators • Response to newly adopted IIA Standards • Internal audit reporting lines • CAE qualifications • Increased emphasis on emerging technology risks • Internal audit compensation

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Five Imperatives For the Remainder of the Decade

Enhancing and

leveraging a continuous

focus on risks

Providing assurance on

risk management effectiveness

Enhancing our

proficiency with data

mining and analytics

Securing a “seat at the table” for

operational and strategic discussions

Solidifying our expertise to address key

risks

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Five Strategic Risks That Could Derail Our Progress

• Failure to concentrate on high-risk areas: “Where was internal audit?”

• The emergence of competitive risk, controls and governance functions that “outperform” us

• Failure to align with expectations of key internal audit stakeholders

• High-profile failures of internal auditor integrity

• Failure to embrace professional standards

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The IIA in 2013: By the Numbers

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• 180,000 members • 115,000 Certified Internal Auditors • 190 countries • 109 Institutes (+ US, Canada, Caribbean) • 601 full and part-time staff • $100.7 million in global revenue* • $7 million of net contribution • $63 million in net assets

* Combined statistics from IIA HQ and Global Institutes for FY ending in 2011

The Global IIA Body By the Numbers

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IIA Institutes by Region

41 42,357

Source: “The Pulse of the Profession: © 2013 The IIA Audit Executive Center

24 17,065

2 72,769

18 11,569

18 32,822

7 3,851

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Key IIA Global Initiatives During the

Past Year

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IIA Global Initiatives in 2012 • Increased Global Website traffic by 400%

222,000 visitors

965,000 page views • Launched Internal Auditor Magazine in Spanish • Expanded www.auditchannel.tv • Certification in Risk Management Assurance • Facilitated New Global Strategic Plans • Successful delivery of 2012 International Conference • Enhanced communication with Global CEO’s

8 Briefings

2 global face-to-face meetings

3 regional meetings • Hosted a Global Guidance Webinar in 3 different time zones

http://www.auditchannel.tv/

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Key Global Initiatives for the Year Ahead

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The IIA: What’s on The Agenda for 2013 • New version of IPPF launched in January • Guidance Webinar in Spanish – February • First digital books to launch in July • Three-part CIA exam launch in July • International Conference in July in Orlando • CRMA exam launch in July • New Institute Agreement • Institute Membership Tool • Quarterly Volunteer Leadership Briefing • Certification Document Upload Portal

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It’s All About Serving Our Members!

Internal Auditing 2013: Key Trends in the Profession and Update on The IIAOverviewThe Global Internal Audit Profession in 20132013 Global Survey DemographicsThe Outlook for Global Internal Audit Resources is StrongThe Outlook for Global Internal Audit Budgets by RegionThe Outlook for Global Internal Audit Staffing by RegionDistribution of Typical Internal Audit Coverage in 2013Distribution of Typical Internal Audit Coverage in 2013Slide Number 10Internal Audit Administrative Reporting RelationshipsInternal Audit Administrative Reporting RelationshipsInternal Audit Functional Reporting RelationshipsInternal Audit Functional Reporting RelationshipsSlide Number 15Slide Number 16Other Global Trends Worth Watching in 2013Five Imperatives For the Remainder of the DecadeFive Strategic Risks That Could Derail Our Progress������The IIA in 2013:�By the Numbers ����������The Global IIA Body By the NumbersIIA Institutes by RegionKey IIA Global Initiatives During the Past YearIIA Global Initiatives in 2012Key Global Initiatives for the Year AheadThe IIA: What’s on The Agenda for 2013It’s All About Serving Our Members!