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					T H E

I I A

R E S E A R C H

F O U N D A T I O N

February 2004

A biannual update from The IIA Research Foundation

Issue No. 6

FROM THE PRESIDENT’S STUDY
It’s official! We’ve successfully merged several overlapping areas within The IIA to tap into the powerful synergy of a more unified mission.
Larry E. Rittenberg, CIA

structure. Previously, the three groups worked independently. Now, they’ll all operate under one division, working hand in hand, building on the strengths of one another. In other words, research will help suggest educational products and vice-versa; and academic relations will play an important role in both areas. The new volunteer organizational chart aligns the education and research operations into The Research Foundation’s corporate structure. Under the oversight of the Trustees, four vice presidents will assist The Research Foundation’s president. A newly formed group, the Board of Research and Education Advisors (BREA), consists of a chairman from the Research Advisory Group and a vice chairman from the Educational Products Advisory Group, whom will both also serve on the Trustees. In addition, a Steering Group helped during the transition phase and may play a role in future product development. We’ve already made the necessary internal changes to keep things running smoothly at the staff level. In fact, The IIA staff has been

working for several months - with great success - to accomplish the combined mission. In our efforts to move the profession forward, this merger capitalizes on the powerful synergies of The Research Foundation, Educational Products, and Academic Relations. All three components play a pivotal role — both strategically and operationally — in the research and educational efforts of The Institute of Internal Auditors. We are continuing the transition to be the global leader for research and educational products in internal auditing. The Trustees have put together a task force to developing a new pricing model and building support for research that will drive how we think about, and how we conduct, internal auditing. Larry E. Rittenberg, CIA, is Research Foundation president and IIA vice chairman of the board – research. He has been an IIA member since 1975 and is currently a professor of accounting for the University of Wisconsin in Madison.

Last October, leaders from the Trustees, Board of Research Advisors, Educational Products, Academic Relations, and staff met to finalize the consolidation efforts of The IIA Research Foundation, Educational Products, and Academic Relations. The result? A combined mission statement, a new volunteer organization chart, and an updated Trustee’s Manual. Here’s a quick rundown of the changes, which took effect on January 1, 2004. The new combined mission now incorporates an academic relations and educational component into The Research Foundation’s

Four Reasons for Supporting The Research Foundation
Why should you pledge your financial support to The IIA Research Foundation? Because The Foundation does so much to further your profession. Take a look: 1. Providing timely, relevant information on the roles, responsibilities, and contributions of internal auditing as well as emerging trends and model practices within the profession. 2. Funding, supporting, and disseminating both theoretical and applied research, and educational products. 3. Helping to improve internal audit research and education in colleges and universities by encouraging, supporting, and assisting in the implementation of collegiate curricula and programs in internal auditing. 4. Supporting educational forums and public discussions that educate practitioners, scholars, and the general public. By making either an individual or corporate donation (or both!), you can demonstrate your commitment to furthering the internal audit profession. The Research Foundation makes it easy to donate by giving you lots of options at various levels. Plus, there are even more donor options. If you want more control over where your donation goes, you can designate your gift as restricted or unrestricted. If you need payment options, you can donate in one lump sum or spread it out over the course of the year, and you can pay by check, credit card, or even automatic payroll deduction. If you’re thinking more long-term, you can also make a contribution through estate planning or bequests.
See Four Reasons page 3

Individual Donors: Trustee’s Circle Patron Sponsor Donor Corporate Donors: Platinum Level Gold Level Silver Level Donor

$300 and up $200–$299 $100–$199 $25–$99 $5,000 and up $3,000–$4,999 $1,000–$2,999 Up to $1,000

Meet Richard Chambers
to the needs of the membership and of the internal audit profession.” Chambers brings an impressive background and a wealth of experience to The IIA. Previously, he served as the inspector general (IG) of the Tennessee Valley Authority (TVA), a wholly owned corporation of the U.S. government. Prior to his work at the TVA, Chambers also served with the US Postal Service in Washington, DC, the US Army’s worldwide internal review organization at the Pentagon; and U.S. Forces Command in Atlanta, GA. Thanks to Chambers’ 30 years in the field, he brings the internal auditor’s perspective to the task of administering the day-to-day operations of The Foundation. “Having been a chief audit executive for many years, I can identify with many of the challenges that today’s chief auditors face,” Chambers says. Chambers received his Bachelor of Business Administration and Master of Business Administration degrees from Georgia State University in Atlanta, Ga. In addition, he holds a Master of Arts Degree in International Relations from Salve Regina University in Newport, RI, and is a graduate of the U.S. Army War College in Carlisle, Penn. Asked about his vision for The Foundation in the coming years, Chambers says, “I expect The Foundation to continue to play an important role in identifying the challenges and issues facing the profession and to frame discussions in a way in which those issues can best be addressed. To me, The Research Foundation will only be successful if it remains relevant to the challenges internal auditors face on a daily basis. Therefore, it must continue to provide premiere, timely, relevant research that will help advance the profession.” And what can members do to help achieve this vision? Chambers offers three ways for members to help. “First, members can identify challenges and best practices by being responsive to The Foundation’s efforts and participating in surveys and research projects. Second, members can show support by using our products and services. And third, members can help by making generous, tax-deductible contributions to help fund our research efforts.”

Last July, Richard Chambers, CIA, CCSA, CGAP, stepped into the shoes of Basil Pflumm, CIA, the recently retired Research Foundation’s executive director for many years. In this new role, Chambers oversees the administration of The Foundation’s resources, staff, programs, and projects. He also serves as the vice president of The IIA’s Learning Center, where he directs certifications, conferences, seminars, educational products, e-learning programs, and the Global Audit Information Network (GAIN). “Basil provided extraordinary leadership, and I’m humbled by the opportunity to follow in his footsteps,” Chambers says. “I’m here as a caretaker of The Research Foundation, and I strive to be responsive

PC Management Best Practices:
A Study of the Total Cost of Ownership, Risk, Security, and Audit
How much does it really cost to own and manage a fleet of personal computers? How much risk exists from business functions at the PC level? How do the new Sarbanes-Oxley requirements impact the PC environment? How can you provide business justification for technology investments? Tough questions. But you’ll find the answers to these and other pressing concerns in a new report from The IIA Research Foundation titled PC Management Best Practices: A Study of the Total Cost of Ownership, Risk, Security, and Audit by Mark Salamasick and Charles Le Grand, 2003. The report puts the critical importance of PC management best practices into clear perspective for business decision makers. It provides a compelling business case for maintaining an up-to-date and wellmanaged PC infrastructure. And it explores how best practices can improve information security, enterprise risk, regulatory compliance, legal liability, business process efficiency, revenue generation, and total cost of ownership (TCO). From an IT standpoint, many companies still use older computers and older software, which might lead to a liability problem. How? Because once hardware and software manufacturers stop supporting older versions of their equipment and programs, customers lack up-to-date security and software patches, making it impossible to secure older computers. “If your organization knows it has machines that are vulnerable, that may be called negligence,” explains Peter Kastner, executive vice president and chief research officer of the Aberdeen Group, a technology consulting firm. Speaking at a recent technology forum to discuss this research project, Kastner also emphasized that older PCs actually cost more to operate, which might explain the high cost of extended warranties. “The optimal desktop lifecycle is three years, which corresponds with the duration of a standard warranty,” says Kastner. Whether you sit on your company’s executive board or you’re an IT specialist, you’ll find practical advice in PC Management Best Practices to help you maximize business value from your PC investments. This groundbreaking report provides a comprehensive framework, business justification, and recommendations for moving toward PC management best practices that enable an organization to maintain a more secure, responsive, and cost-effective PC infrastructure. Using the COSO and SAC models, the report leans heavily on case studies that highlight improved control framework and cost-reduction measures for better decisionmaking and assurance. The report also explains how an up-to-date, well-managed PC infrastructure needs to effectively address issues such as rising security threats, new regulatory requirements, and rapidly evolving liability issues. To view the Executive Summary, visit The IIA Web site at www.theiia.org.

The IIA Research Foundation • 247 Maitland Avenue • Altamonte Springs, FL 32701, USA

Spotlight on The Academic Relations Committee
By Sri Ramamoorti, Academic Relations Committee Chairman With The IIA’s successful internal merger now complete (see the article on page 1), you’ll notice a greater emphasis on promoting internal audit education, research, and practice to both current and future auditors. That’s where the Academic Relations Committee (ARC) steps in. Our mission? To forge relationships among academics, students, practitioners, administrators, and others to promote the role of internal auditing and internal audit education within college/university curricula globally. How can we accomplish this mission, and, more importantly, why should we bother? First, let me tackle the “why.” The ARC believes that, because internal auditing is fundamental to the internal control process of any well-run organization, it should be part of every business and public administration curriculum. Thus, by effectively training tomorrow’s internal auditors, we ensure future growth and success of our profession. So, how does the ARC achieve this forwardthinking mission? Most notably, the ARC stimulates the broad coverage of internal auditing in academic curricula through the Endorsed Internal Auditing Program (EIAP), which recognizes curricula in internalaudit-related disciplines at colleges and universities that now number 43 around the world, with the most recent addition being the University of Texas at Dallas. What else does the ARC do? We work hard to improve internal audit research in colleges and universities and form partnerships and liaisons with professional organizations related to academic relations. We recognize and reward outstanding internal audit educators, as well as IIA affiliates’ achievements in internal audit research, education, and promotion. And we promote awareness of academic programs within The IIA and The Research Foundation. (For the latest information, read our on-line newsletter, “The IIA Educator,” at www.theiia.org.) We’re excited about aligning the ARC within The Research Foundation and the opportunity to enhance and provide support to The Foundation’s ambitious mission “to be the global leader in developing, sponsoring, disseminating, and promoting research, knowledge, and learning resources to foster the development and enhance the effectiveness of the internal audit profession.” That should keep us busy for a while! Sridhar Ramamoorti, Ph.D., CIA, ACA, CPA, CFE, CFSA, CRP, is the Assistant Director of Thought Leadership in the Litigation Advisory Services (LAS) practice of Ernst & Young. Sri is presently the Chairman of The IIARF’s Academic Relations Committee and a member of The IIA Research Foundation’s Board of Trustees. He is a co-editor of the Research Opportunities in Internal Auditing (ROIA) report.

Hats Off to Our 2003 Corporate Contributors
Thanks to the many corporations (listed below) that contributed to The Research Foundation in 2003, The Foundation can continue to fund research projects, sponsor forums and symposiums, award research and doctoral dissertation grants, and assist internal audit educational programs in colleges and universities. 3M Company Allstate Insurance Company American Express Company AmSouth Bank Anadarko Petroleum Corporation Anheuser-Busch Companies Inc. Archer Daniels Midland Company Ashland Inc. Badcock Home Furniture & More Bank of Nova Scotia Blue Cross Blue Shield of Michigan Burlington Resources, Inc. Cargill Inc. Catholic Diocese of Wollongong ChevronTexaco Corporation Clayton Homes ConocoPhillips Cooper Tire & Rubber Co Cooperative Federee de Quebec Deloitte & Touche LLP Dow Corning Corporation Duke Energy Corporation DuPont Company EDS Corporation Entergy Services, Inc. ExxonMobil Corporation Fannie Mae Foundation First Hawaiian Bank Ford Motor Company General Motors Corporation Georgia Pacific Corp. Hazlett Lewis & Bieter PLLC Honda North America, Inc. Hunt Oil Company IBM Corporation ING Americas Intel Corporation Inter-American Development Bank International Consortium on Government Financing JCPenney Company Johnson & Johnson KB Home LaSalle Bank Corporation Lockheed Martin Corporation–Internal Audit Marsh & McLennan Companies Microsoft Corporation Midwest Insurance Auditors Nextel Communications, Inc. New South Wales Department of Housing Occidental Petroleum Corporation Old Republic Title Company Pharmaceutical Internal Audit Forum Prudential Insurance Co. of America Queensland Dept. of Natural Resources and Mines Reader’s Digest Association, Inc. Rockchapel Associates Inc Salt River Project Schering-Plough Corporation Sears, Roebuck and Company Standard Register Co. Structural Metals Inc. Transcanada Pipelines Ltd. TXU Corp. Union Bank of California Unocal Corporation Verizon Communications WalMart Stores, Inc. Waste Management Inc. Williams Companies, The Organizations that donate US $1,000 or more become enrolled in the Master Key Program. For more information on the recently expanded Master Key Program, see the article on page 4.

Four Reasons
continued from page 1

And, if you’re making an individual contribution, you can boost the value of your donation through a corporate matching gifts program. The IIA Research Foundation is a not-for-profit 501(c)(3) corporation operating exclusively for research and educational purposes. As such, it may be eligible for matching and sometimes doubling grants under many corporate contribution programs. If your company offers a matching gifts program, simply send your company’s matching gift application form along with your contribution. Ready to join the donor rolls? Contact The IIA Research Foundation at +1-407-937-1356.

Tel:+1-407-937-1100 • Fax: +1-407-937-1101 • Web: www.theiia.org

Research & Educational Projects in Progress
With the official consolidation of The Research Foundation and Educational Products, the Foundation will offer an even greater array of publications that support both the practitioner and the internal audit profession. In the coming year, you can expect to see these new research reports and educational projects rolling off the presses: • The Pervasive Impact of Information Technology on Internal Auditing • Auditor Roles in Government Performance Measurement • Changing Internal Audit Practices in the New Paradigm • Management Aggressiveness and the Structure of the Internal Audit Function • Business Continuity, Disaster Recovery, and Incident Management Planning: A Resource for Ensuring Ongoing Enterprise Operations • Assessing Risk, 2nd Edition • Key Controls: The Solution for Sarbanes-Oxley Internal Control Compliance • Framework for Internal Auditing’s Entity-wide Opinion on Internal Control

Board of Trustees
President:
Larry E. Rittenberg, PhD, CIA, CPA University of Wisconsin

Trustees:
Andrew D. Bailey Jr., PhD, CIA, CPA, CMA Thomas J. Bussa, CPA Ernst & Young LLP Stephen A. Doherty, CIA, CPA, CISA Credit Lyonnais Americas Diane L. Featherstone, CPA Edison International Kimberly Parker Gavaletz Lockheed Martin Corporation Daniel R. Hahn, CIA, CPA Best Buy Company, Inc. Eric J. Hespenheide, CPA Deloitte & Touche LLP Howard J. Johnson, CIA, CPA Lowe’s Companies Inc. James A. LaTorre PricewaterhouseCoopers LLP Stephen W. Minder, CIA, CPA, CISA, CFE Archer Daniels Midland Company Wayne G. Moore, CIA, CPA DuPont Company Sridhar Ramamoorti, PhD, CIA, ACA, CPA, CFE, CFSA, CRP Ernst & Young LLP Gregory C. Redmond ChevronTexaco Corporation Thaddeus J. Senko, CPA KPMG LLP Sharon E. Stanford, PhD, CIA, CPA Illinois State University Michael K. Stewart, CPA Marathon Oil Company W. Randall Stewart, CPA, CBA, CFSA TXU Corp. Jay H. Stott, CIA Fidelity Investments William L. Taylor, CPA Brian D. Thelen, CPA Waste Management, Inc. Jacqueline K. Wagner, CIA, CPA American Express Company H.C. (Pete) Warner, CIA, CPA Gevity HR Oliver Ray Whittington, CIA, CPA DePaul University Roderick M. Winters, CIA, CPA Microsoft Corporation

Master Key Program Expands
How can you help The IIA Research Foundation continue to fund top-quality research studies and educational programs for internal auditors worldwide? Join the Master Key Program, recently expanded to offer you more levels of donor options and benefits. Here’s what you can expect to receive when you contribute at least $1,000: Silver Level – For contributions of $1,000 or more, you’ll receive all research reports as they are published during the contribution year. Gold Level - For contributions of $3,000 or more, you’ll receive all research reports and educational products published by The IIA Research Foundation during the contribution year. Platinum Level - For contributions of $5,000 or more, you’ll receive all research reports and educational products published by The IIA Research Foundation during the contribution year, plus you’ll receive an invitation to attend a Chairman’s Roundtable and be recognized as a sponsor in research reports. A sample of recent publications, reports, and online resources include: • Internal Audit’s Role in Corporate Governance: Sarbanes-Oxley Compliance • Privacy: Assessing the Risk • Continuous Auditing: Potential for Internal Auditors • Assessment Guide for U.S. Legislative, Regulatory, and Listing Exchanges Requirements Affecting Internal Auditing • Governance Update 2003: Impact of New Initiatives on Audit Committees and Internal Audit • Auditing Vendor Relationships • Sawyer’s Internal Auditing, 5th Edition • Establishing the Internal Audit Activity Manual Update • Sarbanes-Oxley Webcast Series 1 & 2 Of course, The Foundation appreciates donations of any amount to help further the internal audit profession. But if you’re looking for a little “payback” from your contribution, you might want to consider a minimum donation of US $1,000 to receive hot-off-the-press research reports. For details about the Master Key Program, call +1-407-937-1356.

About Our Foundation
The Research Foundation is the global leader in developing, sponsoring, disseminating, and promoting research, knowledge, and learning resources to foster the recognition and effectiveness of internal auditing and thereby improve governance of organizations. Founded by The Institute of Internal Auditors in 1976, The Foundation has set the standard for professional achievement in the internal audit profession. Contributions to The Foundation are tax-exempt under Section 501(c)(3) of the U.S. Internal Revenue Code. Operating exclusively for research and educational purposes, The Foundation pays no taxes on earnings or contributions received. In turn, when U.S. individuals or organizations contribute to The Foundation, their contributions are deductible under Section 170 of the U.S. Internal Revenue Code. To learn more about The IIA Research Foundation, visit www.theiia.org

The RF Report is designed to keep you informed about The IIA Research Foundation. We welcome your comments and ideas. Executive Director: Richard Chambers, CIA, CGAP, CCSA rchambers@theiia.org, +1-407-937-1300 Assistant Vice President, Research and Education: Charity Golden, CIA, CCSA, CGAP cgolden@theiia.org, +1-407-937-1330

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