Internal audit's role in IFRS conversion.

• Author: Heffes, Ellen M.
• Position: Financial reporting - International Financial Reporting Standards

Regardless of when or how we get there, it is expected that the United States will eventually join the more than 100 countries that have adopted International Financial Reporting Standards.

The U.S. Securities and Exchange Commission's proposed Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers, released to the public last November, outlines an adoption date for U.S. public companies of 2014, 2015 or 2016, depending on the size of the issuer.

At the close of the comment period, April 20, the SEC's timeline and next steps toward adoption remain unclear, but there is strong support for the SEC to release a final roadmap to allow companies to better plan for the eventual move toward IFRS.

With all of the changes that need to be made to accounting policies and practices as well as to business strategies, systems and processes, significant work relating to IFRS conversion needs to be undertaken once the roadmap and proposed timeline are finalized.

If they have not done so already, companies must begin to assess what the overall impact will be, when they should start their preparations and then create a realistic timeline for conversion. A clear understanding of the magnitude of these anticipated changes is critical to businesses, as a conversion to IFRS will have a significant impact on virtually every aspect of the business.

Indeed, conversion is a far-reaching effort that affects numerous areas throughout the enterprise: from corporate business functions such as tax, accounting and finance; organizational structures; legal contracts; corporate and business unit responsibilities; executive compensation; and internal audit.

Given internal audit's enterprise-wide purview of the organization and its business processes, this area is uniquely qualified to both assist business units with their assessment of conversion's likely impact as well as help develop plans for implementing necessary changes.

The principal roles for internal audit encompass evaluation of business processes, monitoring of the conversion program, risk management and communications, education and training. For a successful adoption, internal audit should have a seat at the IFRS planning table.

The enterprise "IFRS to-do" list is extensive, critical and fraught with both risks and opportunities. Oftentimes internal audit will be able to help corporate leaders identify, assess and monitor...