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POSITIONEDFOR SUCCESS

2 0 1 0 A N N U A L R E P O R T


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Introduction .................................................................................................01

A Message from Richard Chambers,IIA President and Chief Executive Ofcer ...........................................02

A Message from Gnther Meggeneder,

IIA Chairman of the Board ................................................................03

Charting a Strategic Course ...........................................................................04

Laying the Foundation for IT Improvements .....................................................06

Launching the Audit Executive Center ............................................................07

Demonstrating That Membership Means More .................................................08

Offering Learning Solutions ...........................................................................09

Serving the Global Profession .........................................................................11

The IIA Around the World ..............................................................................13

Elevating and Advocating for the Profession ....................................................15

Charting the Professions Future Direction .......................................................16

The IIAs 2010-2011 Board of Directors .........................................................18

Independent Auditors Report ........................................................................20


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THE INSTITUTE OF INTERNAL AUDITORS / 2010 ANNUAL REPORT / 01

The Institute of Internal Auditors, now in the midst

of celebrating its rich 70-year history as the leader of the internal audit profession, worked determinedly and successfully throughout 2010 to reassess,enhance and reposition itself to meet its membersrapidly growing and evolving needs. The IIA haslong pioneered inventive approaches to solving the

problems facing internal auditors worldwide. This year, we demonstrated how innovation can make thedifference between merely discovering the future andactually dening its success.Directors and senior executives of businesses,governments, and even not-for-prot organiza-

tions around the globe continue, even now,to labor at the task of reinvigorating theirorganizations in the aftermath of the deepest,most pervasive recession in seven decades.Many still are unnerved by the nancial crisisof late 2008 and remain unsure about thesafety and soundness of their strategies andoperating plans for renewing nancial growth.

Not surprisingly, these principal stakeholdersof internal auditing have heightened their

expectations of our profession. They havemade it clear to chief audit executives andto The IIA which advocates the value of leading-edge internal auditing that they now need and expect insightful and objectiveassurance over risk management, grounded ina deep understanding of the organization, itsindustry, and its business objectives.

Meeting those stakeholder expectations canbe an ongoing challenge for internal auditors,

but thanks to the responsiveness and thoughtleadership of The IIA, it is not one they needto undertake alone.

I N T R O D U C T I O N


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02 / THE INSTITUTE OF INTERNAL AUDITORS / 2010 ANNUAL REPORT

On behalf of The IIAs Board of Directors and Global Headquarters staff, it is my privilege to introduce the 2010 Annual Report, marking the beginning of anotherdecade of IIA service to and leadership of the internal audit profession.

When looking back at a full years accomplishments, I am always reminded of theextraordinary efforts required of so many to fulll The IIAs mission and accommodate the complexneeds of our ever-growing membership. When reviewing 2010s achievements, I am especially proud of the member-service enhancements IIA volunteers and staff brought to fruition. Theseachievements have set the stage for exciting prospects throughout 2011 and beyond. Followingthe difcult recessionary years of 2008 and 2009, the excellent nancial results of 2010 willprovide the stability and wherewithal The Institute needs to achieve even more substantialsuccess in the future as we pursue our strategic goals and continue to grow and support theprofession worldwide.

Ending the year with a remarkable net contribution of US$3.5 million indicates not only that ourstrategies are strong and our initiatives are solid, but also that our diligence and commitment areunwavering. I offer my heartfelt appreciation to each and every individual who played a role regardless of size in making 2010 such a banner year for The IIA and its global membership.

Among our many 2010 accomplishments is the successful launch and growth of the Audit ExecutiveCenter. We strongly believe that the stronger the CAE is, the better the internal audit activity willbe. Empowering and connecting CAEs and ensuring relevancy, this Center was born out of thegrowing need for unique services and programs for those at the top of the internal audit ladder.

The pages that follow provide more about the Center, as well as an overview of the many other IIAinitiatives undertaken and milestones reached during the year. After reading this report, I am sure you will agree with me that, indeed, 2010 was a very good year.

Richard F. Chambers, CIA, CCSA, CGAPPresident & CEO

IIA Global Headquarters

A M E S S A G E F R O M R I C H A R D C H A M B E R S ,T H E I I A S P R E S I D E N T A N D C H I E F E X E C U T I V E O F F I C E R


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The IIAs Global Board of Directors and I, as your chairman, are so very proud of having had an opportunity to serve The IIAs global membership and help shapethe future, while confronting both challenges and opportunities throughout 2010. Weare proud of the manner in which IIA volunteers and staff pulled together with inno-

vation and creativity to support the profession as the global economy struggled to recover.And we are extremely pleased by the results of the efforts chronicled in this Annual Report.

On a personal note, 2010 has been a highlight of my professional career as an internal auditor.My Shape the Future theme has served as a reminder of the responsibility each of us carriesto advance and advocate for our profession, model integrity, produce the highest quality of work,conform to our Standards, maintain our certications, live up to our Code of Ethics, and meet andsurpass the expectations of stakeholders. This theme also supports The IIAs work as the profes-sions leader, standard-setter, and guiding light. When IIA members and leaders individually and

collectively do these things, we lay the groundwork and literally shape the future for thosewho will follow.

I am so proud of the many accomplishments The IIA made throughout 2010 and applaud eachand every person who worked so hard to help achieve our goals. Your commitment to and enthusi-asm about our profession made my job so enjoyable.

As you review this Annual Report, I hope you will gain a new appreciation for how far we, as anorganization, have come and where we are headed for the future. I also hope that you will be lledwith pride, as I am, for a job well done.

Gnther Meggeneder, CIA2010-2011 IIA Chairman of the Board

A M E S S A G E F R O M G N T H E R M E G G E N E D E R ,T H E I I A S C H A I R M A N O F T H E B O A R D


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IIA headquarters, guided and supported by its experi-enced and dedicated volunteer leaders and afliatedinstitutes worldwide, last year conceived and began

implementing a ve-year headquarters strategy thathas already demonstrated immense value and out-standing results.The plans for repositioning The IIAs standardsand guidance, certications, thought leader-ship, professional development opportunities,and other products and services complementand extend the larger global IIA 2010-2014

strategic plan formulated and overseen by TheInstitutes global board of directors.

The ve-year headquarters strategy aims toadvance the profession of internal auditingthrough the development and delivery of pre-mier products and services that are relevant,timely, and focused on the needs and expecta-tions of members and other stakeholders. Toaccomplish this, IIA management commits

to running operations characterized by strongbusiness acumen, a focus on developing andretaining outstanding talent, and alignmentwith The IIAs Strategic Plan. The headquartersbusiness strategy comprised seven key goals:

Restore scal position of The Institute.

Design and implement a comprehensiveIT strategy to drive efciencies andenhance service to members.

Develop a business intelligence processthat can be proactively used to improveoperating effectiveness, including marketstrategies.

CHARTING ASTRATEGIC COURSE


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Among The Institutes most important and far-reachingnew initiatives last year was envisioning and beginningto put in place a comprehensive strategy for The IIAsdated information technology (IT) infrastructure.Tactically focused IT processes were no longer meetingthe organizations needs and a comprehensive plan totake The IIA in new directions was lacking.This new strategy is based on creating anintegrated system of business applicationslinked together to form a user-friendly andhighly efcient technology platform for ourmembers, explains Charles Redding, whoin 2010 became The Institutes rst-ever

chief information ofcer. Underpinning thestrategy, he says, is harnessing the power of robust technology solutions (notably MicrosoftSharePoint) to provide information users witha single window into all the informationmaintained by The Institute.

This approach which will be completed in2013 will provide IIA members with a farmore personalized IT experience. Based on

their customizable prole, web content willbe matched to their individual benets,interactions, and communication preferences.The new IT infrastructure will also provideThe Institutes North American chapterleaders with long-sought enhancements to

administrative and reporting tools and otherresources, which in turn will enable them toimprove local service to IIA members.

Work also began last year, Redding notes, ona new global website. This site, scheduledfor a late 2011 launch, will be separate anddistinct from The IIAs current website, whichhas strived to serve both global and NorthAmerican audiences.

LAYING THE FOUNDATIONFOR IT IMPROVEMENTS


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At the outset of the nancialcrisis even before stakeholderexpectations of internal auditbegan heightening dramatically

many chief audit executives began lookingto The IIA for a conveniently accessible suiteof information, resources, and services thatwould empower them to be more successful.

Two years ago our member survey data wasshowing us that more and more CAEs werebecoming disconnected from The IIA and thatperhaps we were not providing as much valueto them as we should. At that time, the AuditExecutive Center was merely a dream sharedby those CAEs, then-new IIA President andCEO Richard Chambers, and some of our key

volunteer leaders, recalls Kevin Mayeux,The Institutes senior vice president and chief ofcer, North American operations. In 2010,

this dream became a highly successful reality.

Key staff and volunteers spent most of last year envisioning what the Center shouldcomprise, building robust IT infrastructuresupport, and developing the initial content.By year-end, the barely two-month-old Centeralready had attracted more than 200 CAEs.Members are empowered by a web-basedknowledge portal, as well as direct access to

resources such as benchmarking and otherrelevant survey data, thought-leadershippapers and timely news publications, cutting-edge topical research, and reports that identify and analyze emerging risks. Center membersare also connected via their participationin webinars, online peer-to-peer knowledgesharing, and attendance at roundtables andother exclusive in-person networking events.

Information gleaned from the Center, in turn,made its members more relevant to their key stakeholders and internal audit staff. TheIIA currently is exploring ways to leverageits investment in the Center to underpincomparable services to CAEs outside of North America.

LAUNCHING THE

AUDIT EXECUTIVECENTER

Membership in The IIAs Audit ExecutiveCenter, which launched on October 24, 2010,grew very quickly to 216 members by year-end, demonstrating its unique value in themarketplace.

October 2010

26Members

November 2010

90Members

December 2010

216Members


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The Institutes strategy to reposition itself alsofacilitated the introduction of the MembershipMeans More initiative that allowed it to signicantly enhance its services to North America (NA).

Partly supported by an NA member duesincrease, The IIA began implementing ahost of exclusive member privileges includ-ing a new members-only publication calledIIA Today, a revised and more user-friendly website, a member gift program providingdeep discounts and complimentary products,and increased North American advocacy ef-forts. Members responded with a record-highmembership renewal of 84 percent.

One of the most popular value-added member-ship enhancements was the addition of freemonthly member-only webinars on timely top-ics important to the profession. Some 52,000member interactions accrued from theseopportunities to earn continuing professionaleducation credits cost-free, and twice thatnumber of interactions is anticipated in 2011.

The IIA also leveraged its investment in onlinedelivery technology to conduct special-purpose

webinars. These included eight briengs to

members on newly released professional guid-ance, and three to chapter leaders on how tobetter service their members through a suite of presentations, materials, and resources availableto them for member development.

The Institutes agship publication, Internal Auditor magazine, continued to be widely acclaimed in both state and national quality competitions. Internal Auditor continues tobe independently veried as a national caliber

magazine whose content quality is competi-tive with publications put out by some of thelargest and most successful associations in thecountry, Mayeux says.

Internal Auditor also remained highly popularamong member readers last year. The online

version of the magazine, which was expandedin content and refreshed in appearance in2010, had a record level of more than 620,000page views during the year and its blogs were

read more than 145,000 times.

84 % NA Member Retention Rate

52 k 52,000 Member Interactions Through

Free Monthly Member Webinars

620 k 620,000 Page Visits for

InternalAuditorOnline.com

145 k 145,000 Views of IIA Blog

DEMONSTRATING THATMEMBERSHIP MEANS MORE


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OFFERINGLEARNING SOLUTIONS


During 2010, The IIA reorganized and revitalized its

educational programs function to capture numerousmarketplace opportunities.Through IIA research, we knew that as orga-nizations contained costs during the recession,training and travel budgets took deep cuts,Mayeux reects. We had to look for waysto ensure that our professional developmentopportunities provided tangible benets to ourcustomers. We had to make it convenient and

of the highest value for dollar spent. And so weengaged not only staff, but also key membersof our relevant volunteer committees, advisory boards, and the North American Board toanalyze what makes IIA education unique,where The Institute envisions itself in the longterm, and how to measure success, he says.

The analysis resulted in more efcient andeffective internal processes for delivering

THE IIA TEAM DEVELOPED FIVE LEARNINGSOLUTIONS STRATEGIC GOALS

1. Increasing attendance and program contribution by deliveringrelevant, innovative, and value-added products to members.

2. Establishing data-driven, member-centric internal processeswith a focus on continuous improvement, consistency, andefciency.

3. Aligning talent to task to ensure employee, instructor, anddeveloper satisfaction and effectiveness.

4. Designing a structure to support achieving The IIAs overallgoals and objectives.

5. Proactively engaging key stakeholders to provide input andgain buy-in for shared educational priorities.


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traditional and new educational offerings inaccordance with a member-centric missionand vision.

Although this initiative was slated for deploy-ment in 2011, some outcomes of the impend-ing strategic shift were immediately recognizedin both live and virtual learning. For example,signicant updates were made to several class-room offerings, and new virtual courses wereadded including Audit Report Writing and theCIA Learning System Part III Review. For theremainder of 2011 and 2012, refreshing existingcurriculum offerings will be a major point of

focus. This includes new course developmenton emerging topics such as cloud comput-ing and social media, updates to our mostpopular existing courses including the Tools &Techniques series, and development of a newfee-based webinar series product line.

We know that people learn in different ways,and when resources are constrained we haveto offer more cost-effective learning opportuni-ties. While face-to-face training is useful and

one of the best ways to absorb knowledge, ourmembership is telling us that virtual learningcan also be effective, Mayeux explains.

The Institutes ongoing investments in TheIIAs CIA Learning System a multi-mediastudy preparation product aimed at prepar-ing internal auditors sitting for the CertiedInternal Auditor (CIA) Exam were strongly

validated. A record number of 12,000 units

were sold in 2010, equating to a 12 percentincrease in the Systems revenues over theprior year. Marketing partnerships between IIAInc. and 30 of its institutes around the worldresulted in the products increased globalpopulation with purchases from customers in150 countries. In addition to the self-study platform, The IIAs CIA Learning System isoffered as an instructor-led course throughmore than 50 live and virtual classroom offer-ings annually. In 2010, Version 3.0 of The IIAsCIA Learning System was released including aFrench translation of the materials.

O F F E R I N G L E A R N I N G S O L U T I O N S

US$2,136,0182009 Conference Revenue

US$2,230,0222010 Conference Revenue


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SERVING THEGLOBAL PROFESSION


Although much was accomplishedduring 2010 in support of TheIIAs North American members,much also was achieved on behalf

of nearly 170,000 IIA members around theentire world. To reach milestones identied inthe strategic plan that assure the professionsprinciples are dened, available, and adheredto, The IIA continued to develop globally itscertications, Standards, and guidance.

In addition to continuing to enhance thetransition of its certication exams to acomputer-based format which began tak-ing place the year prior and ensuring it is aseamless experience for test candidates, TheIIAs certications division focused muchof 2010 on positioning its certication forlong-term relevance. Groundwork was laid toundertake a formal job analysis to validate thecurrent knowledge, skills, and abilities needed

to perform the work of a professional internalauditor. The study, which was launched thefollowing February of 2011, will result in themost up-to-date certication exam content forthe next ve years.

The reporting procedure by which CertiedInternal Auditors verify they are adhering toContinuing Professional Education (CPE)requirements, also received a great deal of focus

by The IIA certications team. Streamliningand automating the process has provided moreefciency and allows The IIA to ensure thatthose who have achieved such a high degree of competency through certication are continuingto maintain and expand their skill set. It alsoprotects the value and brand of the only globally acknowledged certication for internal auditing.

Getting certied is not the conclusion toexhibiting professionalism. Its a continuous

journey says IIA Vice President of Certica-tions Cyndi Plamondon, CIA, CFSA, CGAP,CCSA. Its critical that professional internal

auditors continue to stay current on emerg-ing issues and enhance their knowledge,and its required for those putting those let-ters after their names. To quote Sir WinstonChurchill, Now this is not the end But is,perhaps, the end of the beginning.


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The global nature of IIA certications wasfurther demonstrated as the 2,000th personto earn the Certied Government AuditProfessional (CGAP) designation residedin Indonesia.

In no service realm was The IIAs dedicationto the global internal audit profession moreevident than in the development of profes-sional standards and guidance. IIA staff and

volunteer members of the Internal AuditStandards Board worked feverishly throughthe end of the year to complete the process of

soliciting member and stakeholder commentson and making corresponding renementsto a comprehensive set of revisions to theStandards exposed in draft form late in 2009.These changes, approved last fall by the Stan-dards Board, comprise three new standards,15 modied standards, two standardsdeletions, and modications to six denitionsin the Standards glossary.

As part of The IIAs strategic plan that

internal auditing be seen universally as a pro-fession, a special IIA task force was commis-sioned in April 2008 to develop a value propo-sition that articulates what internal auditingsstakeholders (executive management andgoverning bodies such as boards of directorsand audit committees) should expect froman effective internal audit function. Membersfrom eight countries participated on the task force. Input was sought worldwide at the 2009Global Council meeting and through com-

munications with all IIA institute leaders and

international committee members. The proj-ects completion in 2010 resulted in numerouscommunication materials developed forinternal auditors to use as a basis for discus-sion about how internal auditors provideassurance, insight, and objectivity.

S E R V I N G T H E G L O B A L P R O F E S S I O N

During the year IIA staff and supporting member volunteers alsopublished 12 new practice advisories, ve practice guides, and twoGlobal Technology Audit Guides. This highly recommended guidancewas downloaded by members more than 40,000 times during 2010.

Assurance

Objectivity

INTERNAL AUDITING

Insight

Communicated visually by three intersecting circles,the value proposition is based on the three coreelements of value delivered by internal auditing to

an organization: assurance, insight, and objectivity.


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THE IIAAROUND THE WORLD


IIA chapters and Institutes around the world areThe IIAs essential partners in serving members andrepresenting the internal audit profession worldwide.IIA Institutes are the internal audit profes-sions go-to resources for knowledge, guidance,

training, and involvement in the professionat local, regional, national, and internationallevels. IIA Global Headquarters provides coreservices including the provision of global stan-dards, technical guidance, advocacy efforts,governance activities, and exclusive access tointellectual property of The IIA. Certicationprograms and The IIAs International Confer-ence provide additional benets to internalauditors globally.

One of the most successful global initiatives of 2010 was the International Conference held

July 6 9 in Atlanta, Ga., USA. Drawing anattendance of more than 2,700, the confer-ence earned a net contribution of almostUS$1 million (US$985,000). Keynote speakersfrom internationally recognized companiessuch as Home Depot, Bank of America, Tele-kam Malaysia Berhad, Coca-Cola, and WorldBank attracted internal auditors to the event

from 98 countries. The high marks given in theconference evaluations clearly indicated that

it succeeded in providing world-class profes-sional development.

To ensure IIA Global Headquarters maintains communication and visibility, IIA leaders paidvisits to afliated Institutes and chapters in 36 countries around the world during 2010.


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The IIA also continued to expand its footprint

especially on the African continent withnew Institutes forming in Swaziland and Leso-tho. Representatives from nine IIA Institutesin Africa joined forces to form the AfricanFederation of Institutes of Internal Auditors(AFIIA), and signed a partnership agreementwith The IIA to coordinate activities, promotecontinuity, and explore mutually benecialrelationships. Similar associated IIA organiza-tions around the world who have agreementswith The IIA include the Asian Confederation

of Institutes of Internal Auditors (ACIIA),the European Confederation of Institutes of Internal Auditing (ECIIA), the FederacinLatinoamericana de Auditores Internos(FLAI), and the Union Francophone de lAudit Interne (UFAI).

At a rst-ever Middle East regional workshop held in Abu Dhabi, United Arab Emirates(UAE) IIA Institute leaders from Egypt,Oman, Qatar, Saudi Arabia, Tunisia, the

UAE, and IIA Global Headquarters enteredinto a Pact of Partnership and Co-operationin support of shared interests in advocacy,research, professional development and creat-ing sustained relationships. Regional work-shops provide an opportunity for The IIA toupdate local leaders about key developmentsand strategies, discuss local and regional needsand opportunities, and exchange informationabout other important IIA global and regional

initiatives. The IIA also held regional workshops

in Lima, Peru; Warsaw, Poland; and Madrid,Spain. Additionally, The IIA held its 2010 an-nual Global Council event in Atlanta, whereInstitute representatives from 59 countriesaround the world gathered to give inputand direction to the global IIA board andcommittees.

In addition to issuing global guidance,providing worldwide certication programs,and advocating the profession with key global

organizations, the most valued service weprovide IIA Institutes is the participation of The IIAs key global leaders in national andregional events hosted by them. Through these

visits we have a unique opportunity to directly affect IIA members and interact with key internal audit stakeholders in every corner of the globe, says Sylvia Gonner, vice presidentof global relations and development.

Representatives from several Institutes attendedthe rst Middle East IIA Leaders Workshop.

L to R: 1) Dr. Walter Massey, former Bank of America Chairman of the Board, gives the keynote address of the 2010 IIA International Conference;2) Representing nine Institutes in Africa, Linda Yanta meets with IIA President and CEO Richard Chambers to form the new African Federation of

Institutes of Internal Auditors (AFIIA); 3) IIA Chief Staff Ofcers from various Institutes around the world meet in Atlanta, Ga., USA to discuss commonchallenges and opportunities; 4) Percussionists provide a sample of southern U.S. culture at the 2010 International Conference.

T H E I I A A R O U N D T H E W O R L D


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ELEVATING AND ADVOCATINGFOR THE PROFESSION

Arguably the most signicant andenduring guidance and advocacy-related accomplishment last yearwas forming a global external

body to oversee and make recommendationsto The IIAs Global Board of Directors forimprovements to The Institutes due-processprocedures for setting the Standards and other

elements of the International ProfessionalPractices Framework (IPPF).

Stakeholders are demanding that standard-setters be subject to oversight, says JimSylph, chairman of the new IPPF OversightCouncil and executive director of professionalstandards for the International Federation of Accountants (IFAC). Other highly respectedorganizations currently represented on theOversight Council are the International

Organization of Supreme Audit Institutions(INTOSAI), the Organization for EconomicCooperation and Development (OECD), theNational Association of Corporate Directors(NACD), and Chairman Emeritus of theCommittee of Sponsoring Organizations(COSO) of the Treadway Commission.

The Councils oversight adds an additionallayer of rigor to The IIAs existing standard-setting process, which includes the active

involvement of multiple IIA internationalcommittees of internal auditors. As such,the Council will evaluate the due-processprocedures for setting standards and guidance,review the charters of The Institutes standards-setting committees, and make recommenda-tions for process improvements.

In addition to the organizations representedon the Oversight Council, The Institute

maintained strong advocacy relations in theUnited States throughout 2010 with organiza-

tions such as the Public Company AccountingOversight Board (PCAOB), the GovernmentAccountability Ofce (GAO), and the Centerfor Audit Quality. This advocacy comprisedfar more than merely attending meetings. Forexample, IIA President and CEO RichardChambers served on a blue-ribbon commis-sion constituted by the NACD that last fallissued an extensive report on the emergingroles of audit committees. IIA staff and volun-teers also collaboratively responded to a host

of exposure drafts by the PCAOB, GAO, SEC,and the European Union.

In other global advocacy activities, The IIAworked closely with IFAC by serving on theAdvisory Group to their Standards Board, andcontinued to assist in updating IFAC standard610 Using the Work of Internal Auditors.The IIA also continues to advise INTOSAIsProfessional Standards Committee.

This is by far one of the most signicant un-dertakings of our advocacy efforts. Its part of a new evolution in our organization, says IIAExecutive Vice President and Chief Finan-

cial Ofcer David Polanksy. The strategicimportance of this outside group helps vali-date and drive the work were doing to havethe Standards recognized globally.

NEED TO CUT


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CHARTINGTHE PROFESSIONSFUTURE DIRECTION


The year 2010 also was an extraordinarily successfulone for The IIA Research Foundation, as measured by

volunteer-led fundraising, products sold at retail, andnew books and other cutting-edge materials published.For example, new to The Foundations Book-store in 2010 were Auditing Human Resources;Best Practices: Auditing the Corporate Culture;Planning, Performing and Presenting IT Audits,and many others.

Last years Foundation outputs are much

more user-friendly than usual, as many werewritten by practitioners from a practitioners

view, rather than an academics, says PatScipio, President of the Research Foundation.

The 2010 highlight of The Research Founda-tion was the successful completion of an ambi-tious two-year effort to collect and analyze thesurvey responses of more than 13,000 prac-titioners in 22 languages and more than 107

countries. The resulting ve-volume GlobalInternal Audit Survey, a component of TheIIARFs ongoing Common Body of Knowl-edge (CBOK) study, is the most exhaustivestudy ever of the practice of internal auditingaround the world. This study, published early in 2011, represents the most comprehensive

and valuable insight into the global practiceof internal auditing that has ever been as-sembled. The researchers did a terric job insynthesizing the results and providing key datafor a blueprint for The IIA to better serve theprofession, says Scipio.

The Global Internal Audit Survey provides anempirical demonstration of the dramatic shiftweve seen take place since the nancial crisis.

Research Contributionsand Expenses


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Organizations are recognizing the harmfulimpact of inadequate corporate governanceand the signicant risk it poses to the effec-tiveness of the risk management function.Internal auditors are naturally following therisks and aligning their coverage in responseto their stakeholders changing expectations,Scipio observes.

Of special interest was a CBOK-related report,

A Call to Action: Stakeholders Perspectiveon Internal Auditing, grounded in a separateFoundation survey of and follow-up interviewswith 200 directors, audit committee chairsand members, and senior executives of U.S.companies. The report documents what thesekey internal auditing stakeholders think isgoing well and where there may be a needfor improvement in the professions currentofferings. This was the rst time The IIA hadformally studied the demand-side perspec-

tives of the internal audit profession.

When assessing the professional talent posi-tioned to lead the professions future, The IIAsacademic relations efforts were again fruitful.The IIA approved four new schools for the In-ternal Auditing Education Partnership (IAEP)program, which now comprises 41 schools in10 countries. In October, sixty-four studentsattended the Fourth Annual IAEP Leader-

ship and Networking Retreat in Orlando, Fla.,USA, forty of whom were able to leverage theexperience to schedule internship and jobinterviews.

The Internal Auditing Academic AdvancementFund (IAAAF) raised approximately $200,000to enhance programs at IAEP schools, and ap-proved grants totaling approximately $185,000.Thanks to the generosity of committed donors

and grants from The IIA, the IAAAF hasdispersed almost $1 million to colleges anduniversities around the world since it wasestablished in 2006. The Fund is sustained by donations from individuals, groups, and orga-nizations. Joining IIA Dallas, which is already a Platinum Chapter donor ($25,000+), IIAHouston set the 2010 bar for chapter dona-tions with a $50,000 contribution.

It is critically important that the next gen-

eration of internal auditors is educationally prepared to take its place in tomorrows busi-ness arena, says IIA Senior Vice Chairmanand IAAAF Chairman Denny Beran, CIA,and The IIAs academic relations programs aredesigned to make sure that happens.

To read the full annual reports for The IIARFand IAAAF, log onto The IIAs global websiteat www.theiia.org.

C H A R T I N G T H E P R O F E S S I O N S F U T U R E D I R E C T I O N


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I I A L E A D E R S H I P

EXECUTIVE COMMITTEE

CHAIRMAN OF THE BOARD

Gnther Meggeneder, CIA Head of Internal Auditista InternationalGermany

SENIOR VICE CHAIRMANOF THE BOARD

Dennis K. Beran, CIA, CCSA Senior Vice President/Director of Audit

J.C. Penney Company Inc.USA

SECRETARY

Fatimah Abu Bakar, CIA Executive DirectorColumbus Advisory Sdn, Bhd,Malaysia

VICE CHAIRMAN RESEARCH

Patricia E. Scipio, CIA DirectorPricewaterhouseCoopersUSA

VICE CHAIRMAN -PROFESSIONAL PRACTICES

Philip D. Tarling, CIA, CMIIA International Projects DirectorRSM TenonUnited Kingdom

VICE CHAIRMAN PROFESSIONAL DEVELOPMENT

Paul Sobel, CIA Vice President Internal AuditGeorgia PacicUSA

TREASURER

Oswaldo Basile, CIA, CCSA Executive DirectorTrusty Consultores

Brazil

VICE CHAIRMAN -PROFESSIONAL SERVICES

Michael J.A. Parkinson, CIA DirectorKPMGAustralia

PAST CHAIRMAN OF THE BOARD

Patricia K. Miller, CIA PartnerDeloitte & ToucheUSA

PAST CHAIRMAN OF THE BOARDRoderick M. Winters, CIA General Manager Finance OperationsMicrosoft CorporationUSA


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I I A L E A D E R S H I P

DIRECTORS-AT-LARGE ANDEX-OFFICIO DIRECTORS

Andrew J. Dahle, CIA PartnerPricewaterhouseCoopers LLPUSA

Gervase Ndyanabo, CIA Chief Internal AuditorThe New Vision PPC LtdUganda

Edward M. Dudley, CIA Retired VP & Auditor GeneralABB AmericasUSA

Anton van Wyk, CIA PartnerPricewaterhouseCoopers LLPSouth Africa

Huma Pasha, CIA Chief Internal AuditorHUB Power Company LimitedPakistan

Basil R. Woller, CIA Principal and OwnerBasil Woller and Associates LLCUSA

Alexei Michael Sonin, CIA Independent ConsultantRussia

Richard F. Chambers, CIA, CGAP,CCSA President and CEOThe Institute of Internal Auditors

NORTH AMERICANDIRECTORS

Douglas J. Anderson, CIA Global Finance DirectorDow Chemical Co.USA

Jeff Erdman, CIA Associate PartnerDeloitte & Touche LLPCanada

Michael J. Fucilli, CIA Auditor GeneralMetropolitan Transportation AuthorityUSA

Lawrence J. Harrington, CIA Vice President Internal AuditRaytheon CompanyUSA

Anna R. Nicodemus, CIA VP Internal AuditA.H. BeloUSA

Michael J. Moody, CIA Director of ComplianceNorthwestern UniversityUSA

J. Michael Peppers, CIA Associate Vice President andChief Audit OfcerUT MD Anderson Cancer CenterUSA

Gilbert T. Radford, CIA Director of Audit ServicesVerizon WirelessUSA

Alan N. Siegfried, CIA, CCSA,CFSA, CGAPAuditor GeneralInter-American Development BankUSA

John Wszelaki, CIA Director of AuditCommonwealth of VirginiaDept. of Alcoholic Beverage ControlUSA

INSTITUTE DIRECTORS

Gary A. Anderson, CIA Managing DirectorProtiviti, Inc.Australia

Richard Preston Nelson, CIA Independent ConsultantUnited Kingdom

Laurent Arnaudo, CIA, CCSA Vice President, Corporate AuditAlcatel-LucentFrance

Bernd Schartmann, CIA Executive Vice President, Head of Corporate Audit aSecurityDeutsche Post World Net/DHLGermany

Carolyn A. Dittmeier, CIA Director of Internal AuditPoste ItalianeItaly

Thijs Smit, CIA Chief Audit Executive

SNS REAALThe Netherlands

Chen Hua, CIA Director GeneralNational Ofce Of ChinaChina

David Wen-An Yang, CIA Senior ConsultantErnst & Young LLPChinese Taiwan

Naohiro Mouri, CIA Managing Director, Asia Pacic Auditor JP Morgan Japan

Linda Yanta, CIA Chief Audit ExecutiveEskomSouth Africa


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THE BOARD OF DIRECTORSTHE INSTITUTE OF INTERNAL AUDITORS, INC.ALTAMONTE SPRINGS, FLORIDA

We have audited the accompanying consolidating statement of nancial position of The Instituteof Internal Auditors, Inc. (the Institute) and Afliates as of December 31, 2010, and the relatedconsolidating statements of activities and cash ows for the year then ended. These consolidatingnancial statements are the responsibility of the Institutes management. Our responsibility is to

express an opinion on these consolidating nancial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidating nancial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the consolidating nancial statements. An audit also includes assessing the accountingprinciples used and signicant estimates made by management, as well as evaluating the overallconsolidating nancial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.

In our opinion, the consolidating nancial statements referred to above present fairly, in allmaterial respects, the individual and consolidated nancial positions of The Institute of InternalAuditors, Inc. and Afliates as of December 31, 2010, the consolidating changes in their netassets and their consolidating cash ows for the year then ended, in conformity with accountingprinciples generally accepted in the United States of America.

BATTS MORRISON WALES & LEE, P.A.

Orlando, FloridaMay 17, 2011

INDEPENDENTAUDITORS REPORT


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NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

NOTE A NATURE OF ACTIVITIES

The Institute of Internal Auditors, Inc. (the Institute) was formed in 1941and is a not-for-prot corporation formed to cultivate, promote and disseminateknowledge and information concerning internal auditing and related subjects.The Institutes primary program activities include conducting seminars andconferences to educate and train internal auditors; publishing and sellingperiodicals and materials which inform internal auditors and members of theInstitute of current professional issues, standards and practices; offering exami-nations and certications to internal auditors; and evaluating the performanceof internal audit departments.

Institute of Internal Auditors - Research Foundation, Inc. (the Foundation)is a not-for-prot corporation formed to expand knowledge and understandingof internal auditing by providing relevant research and educational products toadvance the profession globally. The Institutes Board of Directors appoints theFoundations Board of Trustees. Accordingly, in conformity with accountingprinciples generally accepted in the United States of America, the Institutesconsolidating nancial statements include the accounts of the Foundation. Allsignicant interorganization transactions and balances have been eliminated.

Internal Auditing Academic Advancement Fund, Inc. (the Fund) is a not-for-prot corporation formed to support the teaching of internal auditing, establishstandards for internal auditing education at post-secondary educational institu-tions, and other related purposes. Certain of the Institutes employees andboard members serve as ex-ofcio directors and corporate ofcers of the Fund.Additionally, the Fund is a supporting organization of the Institute. Accord-ingly, in conformity with accounting principles generally accepted in the UnitedStates of America, the Institutes consolidating nancial statements include theaccounts of the Fund. All signicant interorganization transactions and bal-ances have been eliminated.

Canadian Institute of Internal Auditors (the Canadian Institute) is a not-for-prot Canadian corporation formed to cultivate, promote and disseminateknowledge and information concerning internal auditing and related subjects inCanada. The Institute controls the Canadian Institute by virtue of provisionscontained in the Canadian Institutes governing documents. Accordingly, inconformity with accounting principles generally accepted in the United Statesof America, the Institutes nancial statements include the accounts of theCanadian Institute. Due to the immateriality of the amounts involved, theactivities and balances of the Canadian Institute are included in the nancialstatements of the Institute.

IIA Properties, LLC (IIA Properties) is a Florida limited liability company organized on May 20, 2008. IIA Properties was formed for the purpose of own-ing real property and carrying on various real estate-related transactions. TheInstitute is the sole member of IIA Properties. Accordingly, in conformity withaccounting principles generally accepted in the United States of America, theInstitutes nancial statements include the accounts of IIA Properties. Due tothe immateriality of the amounts involved, the activities and balances of IIAProperties are included in the nancial statements of the Institute.

NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Restricted and unrestricted revenue and supportContributions received are recorded as unrestricted, temporarily restricted orpermanently restricted support, depending on the existence and/or nature of any donor restrictions. Donor-restricted support is reported as an increase intemporarily or permanently restricted net assets, depending on the nature of therestriction. When a restriction expires (that is, when a stipulated time restric-tion ends or purpose restriction is accomplished), temporarily restricted net as-sets are reclassied to unrestricted net assets and reported in the accompanyingconsolidating statement of activities as net assets released from restrictions.

Revenue recognition and operating activitiesThe Institute recognizes revenue and incurs expenses in its operation of thefollowing activities:

Seminars and conferencesSeminar and conference fees are recognized as income in the period inwhich the event is completed. Expenses include the direct and indirectcosts of conducting seminars and conferences.

MembershipMembership dues are recognized as income ratably throughout the year.Membership application fees are nonrefundable and are recognized asincome when received. Expenses include the direct and indirect costs of delivering member benets, as well as costs associated with recruiting newmembers and servicing and retaining existing members worldwide.

CerticationCertication fees are recognized as income in the period in which theexams are taken. Exam registration fees are nonrefundable and are recog-nized as income when received. Expenses include the direct and indirectcosts of conducting exams.

PublishingSubscriptions and print advertising revenue are recognized as income in theperiod in which the related publications are issued. Website advertisingrevenue is recognized as income ratably over the length of the advertisingcontract. Educational product sales are recognized as income when therelated inventory is shipped. Expenses include the direct and indirect costsof producing and delivering publications, as well as website maintenance.Advertising costs are expensed as incurred.

Quality assessmentQuality assessment service fees are recognized as income as the relatedservice is provided based on the percentage of the engagement completed.Expenses include the direct and indirect costs of conducting quality assess-

ments.

Technology based learning Webinar revenue is recognized as income in the period in which the webi-nar is completed, or ratably throughout the year for annual subscriptions tocertain online offerings. Expenses include the direct and indirect costs of creating and conducting the webinars.

North American servicesGlobal Auditing Information Network (GAIN) subscription fees are recog-nized as income when the product is shipped. Expenses include fulllmentof GAIN subscriptions. GAIN is a knowledge exchange forum available tomember organizations of the Institute.

Audit Executive Center (AEC) membership dues are recognized ratably throughout the year. Membership application fees are nonrefundable andare recognized as income when received. Expenses include the direct andindirect costs of delivering member benets, as well as costs associatedwith recruiting new members and servicing and retaining existing membersworldwide.

Other activitiesDuring 2010, the Foundation reimbursed the Institute for certainpersonnel-related costs and certain shared costs. Such reimbursements arereected as expenses of the Foundation based on the nature of the specicexpenses. Additionally, the Institute absorbs certain overhead costs of theFoundation for which reimbursement is not required. Overhead costs of the Fund are not material to the accompanying consolidating nancialstatements and are paid by the Institute. Reimbursement is not required.


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Revenue received in advance of the recognition period is included in de-ferred revenue in the accompanying consolidating statement of nancialposition.

Cash and cash equivalentsThe Institute, the Foundation and the Fund consider all investment instru-ments purchased with original maturities of three months or less to be cashequivalents.

InvestmentsInvestments are carried at estimated fair value as determined by quoted marketprices. The Funds investments consist of a certicate of deposit which has aone year maturity and bears interest at 1.4% per annum.

Allowance for doubtful accountsAccounts receivable are stated net of an allowance for doubtful accounts. TheInstitute, the Foundation and the Fund estimate the allowance for doubtfulaccounts based on an analysis of specic accounts, taking into considerationthe age of the past due account and an assessment of the clients ability to pay.Accounts are considered past due when payments are not made in accordancewith specied terms. Accounts are written off when management determinesthe amounts are uncollectible.

InventoriesInventories consist of publications and are carried at the lower of cost or market

value using the rst-in, rst-out (FIFO) cost ow method.

Property and equipmentProperty and equipment are stated at cost. The Institute and the Founda-tion use the straight-line method of depreciating property and equipment overestimated useful lives.

Deferred project costsCosts related to seminars, website development and design, and educationalproduct development or revision are deferred until the related projects are com-

pleted. Seminar costs are amortized over three or four years using the straight-line method, website costs over three years using the straight-line method, andeducational product development or revision costs over three years at 60% therst year, 30% the second year, and 10% the third year.

Restricted investmentsRestricted investments consist of endowment funds held by the Foundation,the investment income from which is to be used for scholarships for internalauditing students.

Restrictions on net assetsTemporarily restricted net assets consist primarily of amounts held by the Insti-tute for technological developments, amounts held by the Foundation restrictedfor the William G. Bishop Memorial Fund and amounts held by the Fundrestricted for educational activities. Permanently restricted net assets consistof an endowment fund held by the Foundation, the investment income fromwhich is to be used for scholarships for internal auditing students.

Income taxesThe Institute is exempt from federal income tax under Internal Revenue CodeSection 501(a) as an organization described in Section 501(c)(6) and from stateincome tax pursuant to state law. The Institute engages in certain activitieswhich are unrelated business activities as dened by the Internal RevenueCode, and which are subject to taxation. Income taxes on unrelated businessincome are recognized as expenses as incurred. The Foundation and the Fundare exempt from federal income tax under Internal Revenue Code Section501(a) as organizations described in Section 501(c)(3) and from state incometax pursuant to state law. The Foundation and the Fund have not incurredunrelated business income taxes. The Institute, the Foundation and the Fund

have not taken any material uncertain tax positions for which the associated taxbenets may not be recognized under accounting principles generally acceptedin the United States of America.

Use of estimatesManagement uses estimates and assumptions in preparing consolidating nan-cial statements. Those estimates and assumptions affect the reported amountsof assets and liabilities, the disclosure of contingent assets and liabilities, andreported revenues and expenses. Signicant estimates used in preparing theaccompanying consolidating nancial statements include those used in assess-ing the collectibility of accounts receivable and determining the useful lives of property and equipment. Actual results could differ from the estimates.

Subsequent eventsThe Institute, the Foundation and the Fund have evaluated for possible nan-cial reporting and disclosure subsequent events through May 17, 2011, the dateas of which the consolidating nancial statements were available to be issued.

NOTE C CONCENTRATIONSThe Institute, the Foundation and the Fund maintain their cash and cashequivalents in deposit accounts and money market funds which may not befederally insured, may exceed federally insured limits, or may be insured by an entity other than an agency of the federal government. The Institute, theFoundation and the Fund have not experienced any losses in such accounts andbelieve they are not exposed to any signicant credit risk related to cash andcash equivalents.

NOTE D INVESTMENTS

Investments consist of mutual funds and a certicate of deposit. The Institute,the Foundation and the Fund consider all dividends and interest from invest-

ments as operating revenues for purposes of the accompanying consolidatingstatement of activities. Gains and losses related to investments are consideredto be nonoperating activities for purposes of the accompanying consolidatingstatement of activities.

Net gain on investments (included in Non-Operating Activities in the accom-panying consolidating statement of activities) consisted of the following:

The Institute The Foundation Consolidated Tota

Unrestricted $ 583,316 $103,578 $686,8

In accordance with accounting principles generally accepted in the UnitedStates of America (U.S. GAAP), fair value is dened as the price that an entity would receive upon selling an investment in an orderly transaction to an inde-pendent buyer in the principal or most advantageous market of the investment.

U.S. GAAP establishes a hierarchy to maximize the use of observable marketdata and minimize the use of unobservable inputs, and establishes classica-tion of fair value measurements for disclosure purposes. The hierarchy givesthe highest priority to unadjusted quoted prices in active markets for identicalassets or liabilities (Level 1 measurements) and the lowest priority to unobserv-able inputs (Level 3 measurements). Following is a description of each of thethree levels of input within the fair value hierarchy:

In accordance with accounting principles generally accepted in the UnitedStates of America (U.S. GAAP), fair value is dened as the price that an entity would receive upon selling an investment in an orderly transaction to an inde-pendent buyer in the principal or most advantageous market of the investment.U.S. GAAP establishes a hierarchy to maximize the use of observable market


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NOTE H RETIREMENT PLANS

The Institute maintains a Section 401(k) retirement plan. The Institutecontributes a certain percentage of the total salary of eligible employees to theplan. During 2010, the Institute contributed approximately $652,000 to thisretirement plan.

The Institute maintains two Section 457 deferred compensation plans forthe benet of certain employees. Under the provisions of one of the plans,employees may elect to have a portion of their salary contributed to the plan.Employer contributions to this plan were $54,000 during 2010. Contributionsto the other plan were terminated effective December 31, 2001. The Instituteheld $941,797 in the plans as of December 31, 2010, which is reected in theaccompanying consolidating statement of nancial position under employeesavings plans and deferred employee compensation.

NOTE I COMMITMENTS

The Foundation has entered into contracts and agreements with various partiesfor research projects. Unpaid commitments related to these contracts andagreements totaled approximately $202,000 as of December 31, 2010.

The Institute delivers certain of its examinations in a computer-based testingenvironment (referred to by the Institute as the CBT initiative). In connec-tion with CBT, the Institute entered into an agreement with a third-party (thehosting service) which licenses application software for the management,operation and administration of testing, certication and licensure programsand maintains database functions related to such programs, all of which areoffered as a hosted service. In connection with the agreement, the Instituteagrees to pay the hosting service an annual license fee of $103,000 plus certainincremental fees based on actual volume as described in the agreement. Inconnection with CBT, the Institute has also entered into a test delivery servicesagreement with another third-party (the test provider). Pursuant to the termsof the agreement, the test provider is responsible for various tasks related to

administering tests to participants. The test provider will be paid per test feesand various other fees pursuant to the terms of the agreement. The initial termof the agreement expires during 2013.

NOTE J EXPENSE ALLOCATIONS

Total expenses for the Institute include approximately $20,250,000 of programexpenses, $7,645,000 of supporting expenses, and $8,000 of fund-raisingexpenses for 2010.

Total expenses for the Foundation include approximately $2,279,000 of programexpenses, $450,000 of supporting expenses, and $32,000 of fund-raisingexpenses for 2010.

Total expenses for the Fund include approximately $235,000 of programexpenses for 2010.

NOTE K NON-OPERATING ACTIVITIES

Following is a recap of the amounts included in Non-Operating Activities inthe accompanying consolidating statement of activities:

The Institute The Foundation Consolidated Tota

Provision forimpairment of landcarrying value $ (766,464) $ $ (766,4

Net gain oninvestments 583,316 103,578 686,8

Total non-operatingactivities $ (183,148) $ 103,578 $ (79,5

NOTE L RELATED PARTY TRANSACTIONS

During 2010, the Institute was a party to certain contracts for research and edu-

cational projects and other services with various third parties which includedcertain members of the Institutes Board. Payments to Institute Board members(including companies in which Board members have an ownership interest)during 2010 totaled $96,750.



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Management is responsible for the preparation, integrity, andfair presentation of the accompanying nancial statements. Theaccompanying statements were prepared in accordance withgenerally accepted accounting principles applied on a consis-tent basis and are not affected by material fraud or error. Thenancial statements include amounts that are based on man-agements best estimates and judgments.

Management also prepared the supplemental information in theannual report and is responsible for its accuracy and consis-tency with the nancial statements. The nancial statementshave been audited by Batts, Morrison, Wales & Lee, P.A., inde-pendent certied public accountants, elected by the Board of

Directors. Management has made available to Batts, Morrison, Wales & Lee, P.A. all nancial records and related data as wellas the minutes of the Board of Directors meetings. Manage-ment believes that all representations made to Batts, Morrison,

Wales & Lee, P.A. during its audit were valid and appropriate

Management maintains a system of internal control, which isdesigned to provide reasonable assurance as to: the prepara-tion and publication of reliable and accurate nancial state-ments; safeguarding of assets against unauthorized acquisition,use or disposition; and compliance with applicable laws and

regulations. The system includes a documented organizationalstructure and division of responsibility, established policies andprocedures that are communicated throughout the organization,an internal audit function reporting to the audit committee of the board of directors, and the careful selection, training, anddevelopment of our people.

Management has voluntarily elected to evaluate its system of internal control in accordance with the requirements of theSarbanes-Oxley Act of 2002 and the COSO framework and hasdocumented and tested the key processes used to record activi-

ties and prepare the appropriate nancial statements.

For the annual report as of, and for the year ending, December31, 2010, we certify that to the best of our knowledge:

This annual report does not contain any untrue statementsof a material nature or omit to state a material fact neces-sary to make the statements misleading with respect to theperiod covered by the annual statement;

The nancial information included in this annual reportfairly present in all material respects the nancial condi-tion, results of operations, and cash ows as of and for theperiods presented in the annual report;

An adequate system for disclosing controls and proceduresexists to ensure that material information is made known

to us by others within the organization; Management hasconcluded that the system of internal control over nancialreporting was effective as of 12/31/2010.

Disclosures of any change in the internal control overnancial reporting that occurred during the most recentscal quarter and has materially affected, or is reasonably likely to materially affect, the internal control over nancialreporting are included in this report.

Richard F. Chambers, CIA, CGAP, CCSAPresident and Chief Executive Ofcer

David Polansky

Executive Vice President and Chief Financial Ofcer

MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORT


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Documents

11436 PR Annual Report FNL Hi2