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

Feb. 5, 2021

U.K. Business Secretary to Introduce Corporate Governance and Audit Oversight Reforms

According to the Financial Times, new U.K. business secretary Kwasi Kwarteng will publish a white paper that lists long-delayed reforms to overhaul U.K. corporate governance and audit oversight, much like the Sarbanes-Oxley Act of 2002 did in the U.S. Among the reforms will be new regulations that will make directors — rather than boards — personally responsible for the accuracy of company financial statements through the sign-off of internal controls and risk management. Additionally, directors would face fines or temporary bans if they are found to have breached their duties to uphold corporate reporting and audit standards. Regulators also would have new powers to set and enforce standards for FTSE 350 company audit committees, and businesses would be required to adhere to new rules to report environmental and social obligations. The 200-page white paper, due as soon as next week, is expected to have a 16-week consultation period — much longer than normal — given the broad extent of the reforms.

NIST Publishes Tools to Help Organizations Prevent State-Sponsored Hacks

In response to recent state-sponsored cyberattacks on U.S. critical infrastructure, the U.S. National Institute of Standards and Technology (NIST) has published guidance intended to help companies, industries, and academia secure their sensitive data, the National Law Review reports. According to a NIST press release, Special Publication (SP) 800-172, Enhanced Security Requirements for Protecting Controlled Unclassified Information: A Supplement to NIST SP 800-171, provides tools to "counter the efforts of state-sponsored hackers" and protect "controlled unclassified information." The tools, developed primarily for program managers, chief information officers, and system auditors, are aimed at safeguarding system components through "penetration-resistant architecture, damage-limiting operations, and designs to achieve cyber resiliency and survivability," NIST stated. According to Ron Ross, a computer scientist and NIST fellow, the cybersecurity safeguards in the new guidance "will help system owners protect what state-level hackers have considered to be particularly high-value targets: sensitive information about people, technologies, innovation, and intellectual property."

Executives Who Abuse System to Get Vaccinated Risk Backlash

As vaccination campaigns for COVID-19 go through an uneven implementation, reports have emerged about high-profile individuals abusing the system to get vaccinated. Executives, with their connections and resources, may have an edge in getting access to shots, but observers warn the reputational risks are steep, according to a report in Agenda (paywall). Varying requirements for eligibility, combined with problems with availability, create an environment for exploitation, the report said, putting at risk the reputations of both individual executives and their companies.

Turning the Hard-won Lessons of COVID-19 Into a Better Future for All

Bill and Melinda Gates review the lessons and advances made as the world coped with COVID-19 and what these may mean for the future in their 2021 Annual Letter of GatesNotes: the Blog of Bill Gates. The letter discusses efforts to design economic response plans targeting women and low-wage workers by prioritizing measures such as cash grants, food relief, and moratoriums on rent and utilities. The Gates also talked about preparing for future pandemics, which includes the work of the Coalition for Epidemic Preparedness Innovations to fund vaccine efforts and establish equitable vaccine distribution. "Stopping the next pandemic will require spending tens of billions of dollars per year — a big investment, but remember that the COVID-19 pandemic is estimated to cost the world $28 trillion," they write. Prevention advances are likely to include developing mega-diagnostic platforms, which could test as much as 20% of the global population every week, and a global alert system that constantly monitors for troubling pathogens.

Feb. 3, 2021

Audit Committees Pleased With Audit Improvements in 2021 but Challenges Remain

According to a U.S. Public Company Accounting Oversight Board (PCAOB) report (PDF) based on interviews with more than 300 audit committee chairs, most chairs appear to be optimistic about how external audits have improved in the last year. In particular, they praised their auditors' efforts at maintaining communications with their clients, sharing that they were "thorough, timely, and at the right level of detail." Other highlights include improved assignment of resources with expertise on complex accounting issues, improved consultation with national offices as appropriate, improved practical approaches to problem-solving, and continued maintenance of audit team continuity. Areas that needed the most improvement included helping junior audit team members learn the client businesses, communications regarding auditor independence, guidance around auditing of certain controls for third-party vendors, concerns regarding "over-auditing" and "over-documentation," the lack of visibility and open discussion on fee changes, and issues regarding audit partner rotation.

Global Leaders See Pandemic Concerns, Digital Disruption as Top Risks

Protiviti on Wednesday released a new survey that highlights the risks global executives are most focused on for 2021 — and a decade down the road, in 2030. The report (PDF), Executive Perspectives on Top Risks for 2021 and 2030, represents the views of 1,081 C-suite executives and board members from eight geographic regions. For 2021, concerns about the pandemic and current economic conditions naturally rose to the top, but a heightened awareness of employee adaptation to digital technologies (the future of work), data management, cybersecurity, and regulatory change were not far behind. For 2030, respondents saw the future of work, regulatory change, disruptive innovation, and succession planning as top risks. After a year of social and economic shocks, executives are asking themselves, "What is it that I don't know that I should see?" said Mark Beasley, professor of Enterprise Risk Management and director of the Enterprise Risk Management Initiative at NC State University. "There is a disruptive feel to that."

Incoming Walgreens CEO Will Be Only Black Woman Leading a Fortune 500 Company

Roz Brewer will become the only Black woman leading a Fortune 500 company when she joins Walgreens Boots Alliance next month as its new CEO, CBS News reports. Brewer is currently chief operating officer at Starbucks. Her move to Walgreens also means the three largest U.S. pharmacy chains will be led by women for the first time, according to Bloomberg (paywall). Brewer will join Karen Lynch, who takes the top job at CVS next month, and Heyward Donigan, who has led Rite Aid since 2019. Brewer will receive a $25 million signing bonus from Walgreens on top of her annual salary of $1.5 million, Fox Business reports.

Major Shifts in Transportation Industry Captured This Week 

Reuters reported Tuesday that major automakers have announced they were following General Motors and Nissan Motor Co. in abandoning support for former U.S. President Donald Trump's effort to bar California from setting its own zero-emission vehicle rules. In a joint statement, the automakers — which included Fiat Chrysler, Hyundai Motor, Kia Motors, Mazda Motor, Mitsubishi Motors, Subaru, and Toyota Motor Corp. — said they were withdrawing from an ongoing legal challenge to California's emission-setting powers, "in a gesture of good faith and to find a constructive path forward" with President Joe Biden. Biden has directed agencies to quickly reconsider Trump's 2019 decision to revoke California's authority to set its own auto emissions standards and require rising numbers of zero-emission vehicles, as well as Trump's national fuel economy rollback. Also on Tuesday, the Senate approved Biden's pick for transportation secretary, Pete Buttigieg, who is expected to promote sweeping initiatives to reduce greenhouse gas emissions by implementing stronger automotive fuel economy standards and expanding zero-emission mass transit and electric vehicle infrastructure, according to the Daily Press.

Feb. 1, 2021

If Global Vaccination Distribution Stalls, Normalcy May Not Return Until Past 2022

Despite some tempered optimism regarding vaccine distribution, particularly in the U.S. and some smaller countries, the outlook for the world as a whole is not as rosy, Fox Business reports. According to Swiss investment bank UBS, at current rates of vaccination, only about 10% of the world will be inoculated by the end of 2021, and only 21% by the end of 2022. Parts of Europe, Asia, and Latin America, for example, are still facing significant distribution challenges. Experts are unanimous in the belief that as long as vaccine issuance remains uneven on a grand scale, the risk for outbreaks will still linger far into the future. "So long as the pandemic terrorizes part of the world, normality will not be restored anywhere," said Erik Nielsen, chief economist at UniCredit Bank. Time remains of the essence; if global distribution continues to stall, there is a high probability that the virus could continue to mutate, as has already been seen in South Africa and the U.K., thus rendering the current round of vaccines less effective.

New COVID-19 Strains Will Prolong Global Crisis, Experts Say

Mutated versions of the coronavirus threaten to prolong the pandemic, perhaps for years — killing more people and deepening the world's economic crisis, Axios reports. The U.S. and the world are in a race to control the virus before these variants can gain a bigger foothold, but many experts say they expect things to get worse before they get better. Dutch officials say there are essentially two separate COVID-19 pandemics — the first from the original strain, and the second from the mutated versions.

Factory Growth Uneven as COVID-19 Continues to Roll Across the Globe

The latest performance indicators from the world's factories underscore the uneven nature of the pandemic recovery but also show how factories are continuing to support economies, Reuters reports. Even as many service-sector industries have had to close to prevent the spread of COVID-19, factories have largely remained open. "In general, manufacturing is doing OK," said Claus Vistesen at Pantheon Macroeconomics. "You see some supply-side constraints coming through, but production and new orders are still growing quite strongly." Renewed lockdowns and supply delays have taken a toll on some factories in Germany and the U.K., with British manufacturing in January reporting its slowest growth in three months because of COVID-19 and Brexit complications. Likewise, China's manufacturing sector saw its slowest growth in seven months, due to COVID-19 at home and falling export orders abroad. Japan's manufacturing sector contracted as well. However, manufacturing in other countries grew at a healthier pace — including in India, Indonesia, and South Korea in Asia — and France, Italy, the Netherlands, Switzerland, and some countries in Eastern Europe.  

Internal Audit Foundation Report Reviews 2020 Publications and Previews 2021 Titles

The IIA's Internal Audit Foundation issued a year-end report (PDF) describing the research and educational initiatives it completed in 2020 and previewing its 2021 publications. The report highlights 15 publications and five surveys completed as a result of the Foundation's collaboration with The IIA's national chapters and global affiliates as well as its principal corporate research partners. The Foundation also gave updates on its academic fund, which supports more than 4,275 students participating in 52 Internal Auditing Education Partnership and 21 Academic Awareness schools worldwide. A dozen titles are proposed for publication in 2021.

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