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The latest news headlines on issues and developments affecting the internal audit profession.

Oct. 9, 2020

Scholarship Program to Elevate Internal Auditors Impacted by Pandemic

Internal auditors haven't escaped the economic fallout from the COVID-19 pandemic. Now The IIA and audit software company AuditBoard are offering $500,000 in scholarships to provide training for internal auditors in the U.S. and Canada who have been furloughed or laid off during the crisis. The Elevate Internal Audit Scholarship Program is a response to job losses and other cutbacks in the profession, which have impacted 21% of internal audit teams, according to an IIA survey (PDF). Internal auditors of all levels can use the scholarships to participate in IIA training courses and certification programs. This aid can help internal auditors who have lost jobs "maintain and even enhance their skills, enabling a quicker transition back to work as the economy recovers," said IIA North American Board Chair Nancy Haig. Information about applying for a scholarship is available on AuditBoard's website.

Stockholders Turn to Lawsuits to Hold Directors Accountable

Stockholders are increasingly using litigation in an attempt to hold directors accountable for alleged missteps that resulted in reputational harm to the company, according to an analysis by Agenda (paywall). In the 12-month period that ended in June of this year, 39 lawsuits were filed in federal court that made such claims, a nearly 60% increase from the year before. Stockholders are increasingly linking reputational risks to directors. In addition, directors and corporate leaders have a higher profile as they take public stances on issues such as diversity and inclusion, pay equity, and climate change.

Employee Burnout on the Rise? Tips to Reduce Risks

Signs of employee burnout in the U.S. have increased by 33% according to surveys conducted through LinkedIn's Glint Platform, which has been measuring such risk factors since August 2018. Glint's August 2020 survey results include an analysis of comments from more than 400,000 employees working in roughly 400 different companies. The narrative intelligence text analytics engine found that 5.41% of employees' comments described fatigue, being overwhelmed, and other potential signals of burnout. By contrast, January's reading was just 4.08%. The past two years have averaged 4.12%. Because free-response comments capture only part of the burnout experience, the full number of people feeling similarly may be higher, LinkedIn reported. The article also describes seven ways to reduce such risks.

International Coalition Launches COVID-19 "Passport" to Restart World Travel

International travel has been stalled not only by traveler's fears of catching COVID-19 but also by the dissimilar and confusing health-screening and border-entry requirements of countries around the world. In an effort to standardize the process, the World Economic Forum and Swiss-based nonprofit The Commons Project have launched CommonPass, a digital pass that would allow passengers to document proof of their COVID-19 status within an internationally accepted app, speeding their entry. CommonPass was developed in conjunction with representatives from 37 countries on six continents. The program will undergo trial runs between Hong Kong and Singapore and between the U.S. and the U.K., using a small group of airports and airlines, Forbes reported. Passengers participating in the program would have to be tested at a certified lab, upload their results to their mobile phones, and then complete any additional health-screening questions required by the host country. A QR code would be scanned by airlines and border officials. According to Forbes, tests are also being planned for additional airlines and hubs across Asia, Africa, the Americas, Europe, and the Middle East.

Even Smart Coffee Makers Are Not Immune to Hacking

As an example of the litany of risks associated with operating in an Internet of Things (IoT) environment, a senior researcher at cybersecurity company Avast recently figured out how to hack into a smart coffee maker and program it to ask users for money. According to a report by Fox News, the coffee maker, made by a company called Smarter, allows someone to make coffee using their smartphone or tablet. However, this model was particularly vulnerable to hacking. "We created ransomware that when triggered renders the coffee maker unusable and asks for ransom, while at the same time turning on the hotbed, water dispensing heating element permanently, and spinning up the grinder, forever, displaying the ransom message and beeping," said Martin Hron, the mastermind behind the exploit. "The only thing the user can do at that point is unplug the coffee maker from the power socket," he added. Smarter switched to a new, more secure platform for its coffee makers in 2017. Organizations should take every step to ensure that their cybersecurity plans are as thorough as possible — including even seemingly innocuous interconnected devices that could be manipulated for nefarious purposes.  

Oct. 7, 2020

Trump Administration Tightens Restrictions for Foreign Worker Visas

The Trump administration changed the rules for highly skilled foreign workers who want to live and work in the U.S. as part of the H-1B visa program, the Departments of Labor and Homeland Security announced Tuesday. USA Today reports that the changes, which become effective in 60 days, will require employers to commit to higher salaries for such workers and visa applicants to have a "specialty occupation" that narrowly fits their formal qualifications. Visa lengths also could shorten. A Department of Homeland Security official told reporters that he expects about one-third of H-1B visa applications would be rejected under the new set of rules, according to The Wall Street Journal (paywall). The Journal also reported that the change is likely to disproportionately affect technology workers. Internal auditors at organizations that rely on employees with H-1B visas should advise management about how the new regulations may impact their recruiting and employee retention practices.

Economic Forecasters See COVID-19 Resurgence as Biggest Threat to U.S. Economy

The biggest threat to the U.S. economy is a second wave of COVID-19, according to economic forecasters surveyed by the National Association for Business Economics (NABE). Of the 52 panelists, 55% regarded a resurgence of COVID-19 as the most serious threat, while 20% said a lack of further government aid posed the biggest risk, U.S. News reported. The NABE panel as a whole foresees a 4.9% annual growth rate for the October–December quarter and a 4.3% decline in gross domestic product for all of 2020. Also, more than half of the panelists agree that between 10% and 20% of jobs lost during the pandemic are permanently gone.

U.S. Labor Department Contacts Microsoft, Wells Fargo Over Diversity Plans

The U.S. Labor Department has contacted Microsoft and Wells Fargo over their plans to hire more Black employees as they seek to diversify their management ranks. Microsoft said the department is questioning whether its pledge to double the number of Black managers and leaders in its U.S. workforce by 2025 violates federal laws prohibiting discrimination based on race. Wells Fargo said it received a similar letter from the department reminding the bank that quotas are prohibited. Black employees represent less than 3% of senior management at Microsoft and about 6% at Wells Fargo, while Black people make up about 13% of the U.S. population.

Poll Finds 68% of Americans Want CEOs to Take a Stand on Social Issues 

According to a new poll issued by JUST Capital, 68% of Americans think CEOs should take a stand on social issues. These findings come as business leaders have increasingly become involved in responding to the racial justice protests that have been one of the defining features of 2020, Forbes reports. This is a significant jump from 2019, when only 59% said they wanted CEOs to take a stand on social issues, noted JUST Capital, a nonprofit that ranks companies based on factors such as environmental and community impact. Of those who said CEOs have a responsibility to take social stands, two-thirds also said leaders should do so on issues that do not directly impact their business — an increase from 50% in 2019. Boards and C-suite members are expected to continue this conversation as the public's view on their roles in society evolves. 

Oct. 5, 2020

Accounting Scandals Raise Questions About Responsibility

Accounting scandals, such as the recent one involving EY's initial failure to detect a roughly $2 billion fraud at Wirecard, confront board members with the question of whether to go through the long process to change auditors. In addition, noted an article in Agenda (paywall), such scandals revive the question of who in the audit process — from outside auditors to internal audit to audit committee members — ultimately bears responsibility. Experts say the Wirecard scandal could promote progress in resolving the question of responsibility, in the same way that the financial fraud at Enron and WorldCom helped lead to the U.S. Sarbanes-Oxley Act of 2002.

U.S. Labor Data: Weakening of Economic Rebound

The U.S. job market recovery continued but at a much slower pace in September, as many Americans quit looking for work and COVID-19 resurged throughout the country, according to Bloomberg (paywall). The unemployment rate fell by more than forecasted, dropping 0.5 percentage point to 7.9%, though the labor-force participation rate declined by 0.3 percentage point to 61.4%. The report was released at the end of the same week in which blue-chip companies, including Walt Disney Co., Allstate Corp., and Goldman Sachs Inc., announced tens of thousands of layoffs. The decrease was particularly pronounced among women, who dropped out of the labor force at more than four times the rate of men, according to a National Women's Law Center analysis (PDF) of the Bureau of Labor Statistics' data.

KPI Mismatch Partly to Blame for Rio Tinto's Tone-deaf Actions, Says HBR

Could having the right key performance indicators (KPIs) save companies from making mistakes that lead to reputational damage? Strategic Factors CEO Graham Kenny says it can, offering an analysis of the besieged Rio Tinto as proof. The mining company came under fire from shareholders and minority-rights protestors after it destroyed Aboriginal heritage sites in Australia, "in full knowledge of the site's existence and importance" and to save itself from losing $135 million in profits, Kenny wrote in the Harvard Business Review (paywall). Kenny points out that in its annual report, Rio Tinto strongly expressed solidarity with stakeholders — employees, customers, suppliers, local communities, and host governments — yet failed to include most of these stakeholders in its KPIs. Of its eight published KPIs, "six relate to shareholders and concern metrics around profit, return on capital employed, and debt;" one relates to employee safety; and the last deals with greenhouse gas emissions. Yet the censured mining company is not alone. In an analysis of other mining companies and Australia's largest bank, Kenny found that most KPIs focus on shareholders. He adds: Because "what gets measured gets managed," companies that neglect to measure their performance toward "valued stakeholders" can set themselves up for reputational risk.

COVID-19 Tracker Now Says 10 States Are at a Tipping Point

Despite some optimism that the U.S. has turned a corner in its struggle against COVID-19, the disease appears to be on a dangerous upswing, according to a risk-assessment map produced by the Harvard Global Health Institute and the Brown School of Public Health. According to the map, the number of high-risk states has jumped from four to 10 in the past two weeks, Forbes reports. Alabama, North Dakota, Oklahoma, and South Dakota each are reporting 25 or more new positive COVID-19 cases every day per 100,000 people. At that level of spread, states should be under stay-at-home orders, according to the Harvard and Brown researchers. At this rate, a model run by the Institute for Health Metrics and Evaluation at the University of Washington projects that the U.S. will hit 371,000 deaths related to COVID-19 by Jan. 1, 2021. As businesses still establish plans for returning to some semblance of normalcy, delays in their time lines should be expected and accounted for.

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