National Surveys Released

Directors, Auditors Echo Presidents Call for Reform of Financial Reporting and Monitoring Processes. This is reported by a new survey of board of directors.

ALTAMONTE SPRINGS, Fla.-Many corporate directors and the internal audit executives who serve them support wholesale changes in Americas financial reporting and monitoring systems in the wake of Enrons bankruptcy, according to new surveys conducted jointly by The Institute of Internal Auditors (IIA) and the National Association of Corporate Directors (NACD).

Pluralities of respondents to a survey of directors and to a companion survey of top-level internal auditors-47 percent and 47. 6 percent, respectively-believe major changes are needed to U.S. accounting standards. In contrast, only 29.1 percent of responding directors and 25.8 percent of auditor respondents say no changes are necessary. The remaining respondents say they are not sure.

Directors are more evenly divided on the issue of whether a new public group should be established to monitor external auditing, as proposed by the U.S. Securities and Exchange Commission. Although 37.3 percent of respondents favor this proposal, 35.1 percent oppose it, and 27.6 percent are unsure.

In his State of the Union address, President Bush indicated strong support for accounting reform," points out IIA President William G. Bishop III. And based on the results of the very timely research weve conducted in partnership with the NACD, internal auditors and those responsible for corporate governance agree that major changes-perhaps including renewed public oversight of external auditing-are needed."

Through the governance survey," says NACD President Roger Raber, corporate directors from a broad spectrum of public and private sector companies have made a collective call for industry self-regulation. They are expressing significant concern for protecting shareholder and employee investment and for assigning corporate accountability."
Although few audit committees or boards have met since Enrons collapse, many respondents to both surveys report that Enrons collapse already has sparked plans to consider a variety of changes within their organizations. Most of these actions, according to survey respondents, involve key areas such as:
·   Understanding the risks and making accurate disclosures of derivatives, off-balance-sheet liabilities, and other complex financial transactions.
·   Adequacy of oversight by directors serving on audit committees and boards;
·   Corporate ethics and enterprise-wide risk management policies and procedures;
·   Reliance placed on the independence of the external auditor; and
·   Adequacy of internal auditing.

Areas identified in the surveys that may be ripe for more study and perhaps additional controls include policies on the selection and/or retention of external auditors and on hiring employees or former employees of the external audit firm.

The Internet-based surveys were conducted Jan. 25-26, 2002, among 1,200 members of the NACD and 2,150 chief audit executive members of The IIA. Results were compiled based on 278 responses to the auditor survey and 135 responses to the director survey. Copies of the surveys and the responses are available from The IIA.

Established in 1941, The Institute of Internal Auditors (IIA) is an international professional association with world headquarters in Altamonte Springs, Fla. The IIA has more than 75,000 members in internal auditing, risk management, governance, internal control, IT audit, education, and security. With representation from more than 120 countries, The Institute is the recognized authority, principal educator, and acknowledged leader in certification, research, and technological guidance for the profession worldwide. IIA Web site: www.theiia.org.

Founded in 1977, the National Association of Corporate Directors is a nonprofit organization dedicated exclusively to enhancing director effectiveness through research, continuing education, peer forums, and in-house advisory services for corporate boards. NACD promotes high professional standards among directors and is a leading authority in traditional and cutting-edge corporate governance issues. NACDS 11,000 members and customers represent boards ranging from Fortune 100 and NASDAQ companies to the smaller OTC, private, and closely held firms. NACD Web site: www. nacdonline.org.
NACD Contact:   Doreen Kelly Ruyak, Senior Marketing & Communications Executive
Tel:   +1-202-775-0509, Ext. 211
Fax:   +1-202-775-4857
E-mail:   dkruyak@nacdonline.org