2018 ANNUAL REPORT Documents/2018... · Association of Chartered Certified Accountants (ACCA) were offered the opportunity to take the CIA Challenge Exam to earn their CIA designation

2018 ANNUAL REPORT

2 | The Institute of Internal Auditors 2018 Annual Report

The Institute of Internal Auditors 2018 Annual Report | 3

What does an internal auditor do?


Table of Contents

Rewind Celebrating Success Across a Multitude of Platforms

Fast Forward Providing Dynamic Leadership to Connect with Members

Play Advancing the Vision with Key Initiatives

08 1714

President and CEO Message

Global Chairman Message

New Heights in Certifications

On the Road to Digital Transformation

Delivering an Enhanced Membership Model

Advocating Around the Globe

Building Support and Capacity

2018 Financial Results

Copyright © 2019 by The Institute of Internal Auditors, Inc. All rights reserved.

Spotlight


IIA Recognizes 150,000th CIA Recipient as Interest in Internal Audit’s Certification Standard Grows

Enhanced Governance Structure Receives Membership Approval

I remained connected to The IIA throughout my career in internal audit and various business operations. The insights, foresights, guidance, and thought leadership provided by The IIA helped me become an effective leader. I have enjoyed many opportunities as a longtime volunteer. Now that I’ve retired from a career built around an internal audit core, new frontiers have opened as I seek innovative ways to advance the profession. Most recently, that has included serving as vice chair of the Internal Audit Foundation’s Committee of Research and Education Advisors, and serving as a contributing author, one of the technical editors, and a member of the Advisory Committee for Sawyer’s Internal Auditing, 7th Edition. I will stay involved with The IIA — as a volunteer and as a donor — because I strongly believe in paying it forward by giving back to the profession that has given so much to me.

Angelina Chin, CIA, CCSA, CRMA, Retired Audit Director, Leadership Society Donor

The Year in Review

IIA Announces Key Updates to CIA Certification Exam

IIA Welcomes Venezuela, Kuwait, and Azerbaijan as International Chapters, and Establishes Networks in Vietnam and Pakistan

IIA’s 2018 International Conference in Dubai Attracts 3,000

COSO and IIA Announce ERM Certificate

IIA Recognizes 42 Affiliates and Chapters as Building Awareness Champions

IIA Participates in UN-INTOSAI Meeting on Sustainability

Bloomberg Interviews Chambers on Board Responsibility in Sexual Misconduct Cases

IIA Repositions Specialty Certifications

IIA Recognized at Top 100 Companies Celebration

IAEP Exchange Attracts Students From Around the World

Chambers Discusses Risk Management and Corporate Culture with CNBC

IIA Launches Global Review of “Three Lines of Defense”

Internal Audit Foundation Releases 7th Edition of Sawyer’s Internal Auditing


President and CEO MessageDisruption is often viewed as something negative, an obstacle to success. But for The Institute of Internal Auditors, we see disruption as something to embrace, a challenge that pushes our organization to greatness. That’s why this annual report is titled “Disruption by Design.” There are no surprises here. No accidents. Just a commitment to best serve the internal audit profession and our approximately 200,000 members worldwide now and well into the future.

Over the past year, we have been busily laying the groundwork on key initiatives that will create a more efficient and effective operation, enhance the experiences of our members, and reinforce The IIA as the premier source and advocate for the internal audit professional globally.

Chief among our efforts is a multimillion-dollar, organization-wide digital transformation. This expansive project, the scope of which has not been seen in The IIA’s 78-year history, ultimately will usher in a new era of effective certification and association management, a streamlined e-commerce platform, and a member-friendly, easy-to-navigate IIA website.

Disruption by design. But it couldn’t be done without the dedication of IIA staff, the commitment of volunteer leaders around the world, and a sound foundation. In 2018, The IIA extended its string of annual positive net contribution results to 10 years and marked record revenue of $65.6 million.

Additional highlights in 2018 included outstanding performance at conferences and events; certifications and exam results that exceeded expectations; major advocacy and capacity initiatives in North America and around the world; and membership that continued to climb toward a milestone 200,000 at year’s end. Reflective of the importance it places on its core values, The IIA also was recognized for the 14th year as a Top 100 workplace.

As I mark my 10th year as President and Chief Executive Officer, I am grateful for the strong support of a board whose members recognize that building on the successes of the past decade means we have to have the right infrastructure; we have to have sustainable but ambitious business models; and we have to have strong governance.

We must always be willing to challenge ourselves and to recognize that the biggest risk we face as an organization is complacency. I believe that it is by intelligently harnessing the strength inherent in disruption that we will be able to chart a successful future course of our own design.

Richard F. Chambers CIA, QIAL, CGAP, CCSA, CRMA President and CEO


Global Chairman MessageServing as the 2018–19 Global Chairman has been an honor and a very humbling experience for me. There have been many memorable moments at events expertly arranged by gracious and accommodating Chapter and Affiliate leaders that attracted audiences filled with energetic and engaged professionals.

Perhaps the most humbling experience was my first speaking engagement after officially becoming chairman in May 2018 at International Conference in Dubai. I presented my chairman’s theme — Emphasize the Basics. Elevate the Standards. — to 280 attendees at the 8th National Conference in Quito, Ecuador. At the conclusion of my presentation, every audience member — or so it seemed! — approached the stage to have their picture taken with me. That is when I realized the enormity of my role as chairman in representing the profession I am so passionate about.

When my chairman’s year ends, I will have traveled to nearly four dozen destinations, and spoken to more than 10,000 people about the importance of conforming to The IIA’s International Standards for the Professional Practice of Internal Auditing, and then encouraging them to add value by attaining the designation of Certified Internal Auditor, the only internal audit certification that is globally recognized.

I am grateful to have been given the opportunity to present my chairman’s theme in a new interview-style question-and-answer session following the video. I truly value the opportunity that format has provided to engage more fully with the audience. And I believe the message is having its intended impact, if the number of people approaching me afterward to say they are going to pursue the CIA designation is any indication. Indeed, one of our organization’s 2018 highlights was recognition of the 150,000th CIA recipient — a number that had grown by more than 7,000 at year’s end.

Because I have been so focused on savoring every moment of this priceless experience, I have spent little time contemplating life after my chairmanship. One thing I do know, however, is that I will continue to contribute in whatever way I can to a dynamic and fascinating organization that represents around 200,000 members worldwide. In the meantime, I will continue to be a Standards-bearer everywhere I go, because it is my strong belief that, by emphasizing the basics, not only do we elevate the Standards, we elevate the entire profession.

Thank you for allowing me the privilege of traveling this road with you.

Naohiro Mouri CIA Chairman of the Global Board, 2018–19

rewind

Celebrating the SuccessesIt’s no secret that a professional association survives and thrives on the success of its members. That is why everything The IIA does, it does with members in mind, from providing globally recognized standards and leading-edge educational opportunities to conducting thought-provoking research and far-reaching advocacy efforts, all across a multitude of platforms.

Sold Out!There are myriad ways to gauge success, but perhaps one of the most telling is by the number of members and other professionals who are attracted to your conferences and other events because of the extraordinary opportunity those forums provide to learn all the latest and to network with peers. In that regard, 2018 was a banner year for The IIA.

Exercising its role as the internal audit profession’s principal educator, The IIA hosted several sellout events in North America in 2018: a first-ever for the General Audit Management (GAM) Conference, with 1,545 attendees; the Governance, Risk, and Control (GRC) Conference in collaboration with ISACA, which exceeded an expanded capacity of 750; the Financial Services Exchange (FSE), with more than 540 attendees; and the Women in Internal Audit Leadership Forum, with more than 100. IIA–Canada continued the trend of sold-out events when more than 660 gathered in Montreal in October for the Canadian National Conference.

Also receiving very good feedback on session content was the annual All Star Conference, which attracted more than 640 attendees.


TOTAL ATTENDEES TO 2018 NORTH AMERICA CONFERENCES

A record number of attendees took advantage of GAM offerings.

All Star

Environmental, Health & Safety – FALL

Environmental, Health & Safety – SPRING

Emerging Leaders Forum

Financial Services Exchange

General Audit Management

Gaming & Hospitality

Governance, Risk, and Control

Women in Internal Audit Leadership Forum – FALL

Women in Internal Audit Leadership Forum – SPRING

647

95

47

44

542

1,545

267

972

102

116

4,377


On the World Stage Other event highlights included the International Conference in Dubai, UAE, in May, with more than 3,000 attendees representing 113 countries and territories, and Global Council in February, with more than 150 participants representing 80 IIA Affiliates, held in Panama City, Panama. The Internal Auditing Education Partnership (IAEP) Exchange, held in Orlando, Florida, USA, recorded its largest attendance in the past 12 years, drawing 97 students, 28 IIA chapter academic relations chairs, and 37 educators from nine countries.

In addition, The IIA supported highly successful regional conferences around the world by hosting invitation-only regional meetings with Affiliate leaders. The meetings, held in conjunction with conferences organized by ACIIA, ECIIA, FLAI, and UFAI, were well-attended by leaders from nearly 60 Affiliates. These meetings keep Affiliates informed about key global activities, but perhaps more importantly, they provide great insight into Affiliate activities and needs so that strategies and resources can be developed to aid in their continued growth and sustainability.

Angie Wong, a graduate student from the University of Texas at Dallas,

interviews 2018-19 Global Chairman Naohiro Mouri at IAEP Exchange.

“ I am a guardian of trust.“


Reaching New Heights In May, The IIA recognized the 150,000th recipient of the Certified Internal Auditor designation. Driven by a campaign that encouraged practitioners to “Accelerate Your Success” by attaining the CIA designation, those seeking the only globally recognized internal audit certification took the next step to elevate their careers to the next level. By year’s end, that March milestone was handily surpassed, as another 7,101 joined the CIA ranks.

Of the nearly 70,000 IIA exams delivered in 2018, 65,000 were CIA exam parts, representing a 20 percent increase from 2017. China remained the biggest market for the CIA, with 34,000 exams delivered in that country, an increase of 27 percent over 2017.

In addition, qualified members of the Association of Chartered Certified Accountants (ACCA) were offered the opportunity to take the CIA Challenge Exam to earn their CIA designation. Nearly 1,500 individuals participated in the challenge exam, which resulted in 1,000 new members joining The IIA through the program. This success demonstrates the growing global demand for the CIA designation. Top countries represented were the United Kingdom, United Arab Emirates, Malaysia, Singapore, and Cyprus.

And all of that added up to another record for the Certifications department in 2018: a $2.8 million, or 17.7 percent, increase from 2017 revenue to $18.9 million.

A Structural Change for Governance Signaling another successful — and historic — milestone for The IIA in 2018 was the vote of the membership to change the structure of the Board of Directors to create efficiencies in the organization’s volunteer governance. To help facilitate the transition of the 37-member board to its new 17-member structure, additional Global Nominating Committee (GNC) members were approved to broaden the representation and knowledge base for identifying and assessing nominees for the new board.

A new online nomination system, developed with input from the GNC, was piloted for use in 2019–20 Global Board selection. The new system for Global Board nominations provides for a more robust, streamlined, and user-friendly process for candidates as well as for the GNC. For the first time in 2018, the GNC conducted in-person or video interviews of all candidates under consideration.

The final slate of candidates will be presented for membership approval at the 2019 International Conference in Anaheim, California, USA.

I received the designation of Certified Internal Auditor in December 2018. It was important for me to become certified as an internal auditor because I want to make sure I perform my work in conformance with The IIA’s Standards. As the profession continues to evolve, I know that, as an internal auditor, I need to understand best practices and comply with The IIA’s Code of Ethics. It helps make me a trusted advisor and sets a bold tone in any discussion I have with others about internal auditing. For those who may be considering the certification, I would say: Work hard to understand the concepts, and never give up on your journey. It is worth the effort.

John S. Kimwemwe, CIA, Head of Internal Audit, Equity for Tanzania Limited

“ I model integrity, objectivity, confidentiality, and competency every day.“

Spotlight

* All numbers as of Jan. 1, 2019

1974 1990 2000 2010 2017 2019

8,037 17,276 32,143 98,552 149,148 157,101And Growing

CIA Over the Years*

North America 53,475

Europe 17,161

Middle East 3,838

Asia Pacific 72,055

No Country Stated 5,049

Central/South America 1,585

Africa 3,854

Caribbean 84

All-time CIA Certified Individuals by Region


Of the nearly 70,000 exams delivered in 2018, 65,000 were CIA exam parts. Total certifications by region increased from 183,985 in 2017 to 194,014 in 2018.

CIA ......................................... 157,101

CCSA ........................................ 7,629

CGAP ....................................... 5,465

CFSA ......................................... 7,053

CRMA .................................... 15,458

QIAL ............................................ 567

IAP ................................................ 741

GRAND TOTAL : 194,014

Total Certifications

Virtual SuccessThe Public Sector Audit Center (formerly the American Center for Government Auditing) delivered a standout performance when more than 570 tuned in for the center’s inaugural virtual symposium, “Preparing Public Sector Auditors for Tomorrow’s Terrain.” Based on that success, two more virtual symposiums were planned for 2019 — one executed in March that focused on emerging issues such as third-party risks, data analytics, and board/management interaction, and another lined up for November that will include a presentation on Public Sector Vision 2020, IIA–Canada’s participation in a segment on federal best audit practices, and two hours of ethics training.

There also were about three dozen webinars, many exclusively for members, showcasing emerging and other topical issues in areas including financial, public sector, environmental, health, and safety, and much more.

The virtual symposium is just one of the delivery tools Standards and Professional Knowledge is using to extend content to members in transformative ways that are easily accessible and understood. To that end, plans are underway to adopt for Standards and Guidance what is currently being done with the Specialty Centers to develop webinars and podcasts.

Standards and Professional Knowledge also produced a total of 60 Knowledge Briefs through the Specialty Centers and the Audit Executive Center on subjects ranging from investigating fraud to understanding blockchain to navigating emerging environmental risks.


A Smooth Move for Digital TransformationWork began in earnest on The IIA’s Digital Transformation project in 2018 that will improve the experience of Affiliates, Chapters, members, and others when conducting business with the organization. Vendors and platforms were selected for all four transformation components – the Certification Candidate Management System (CCMS), the Association Management System (AMS), e-commerce, and The IIA’s website. The first element to launch, CCMS, will provide a modern user experience by streamlining the certification process for end users, Chapters and Affiliates, and The IIA.

In June, a critical component of how The IIA interacts with customers and members underwent a smooth conversion, thanks to the tireless efforts of a dedicated IT team. Membership data was migrated to a new Customer Relationship Management (CRM)-based module that allows for a more streamlined, reliable experience. This conversion was but a single piece of a multimillion-dollar project that will include many other changes and new components, including the ease of single sign-on.

E-commerce One-stop shop

Web One IIA

CRM Centralized data repository

Eliminate multiple databases

Provide ability to schedule and manage exam appointments directly in candidate portal

Streamline application process

Provide single user experience for entire certification lifecycle

The IIA’s Certification Candidate Management System (CCMS) will:

“ I improve risk management, internal controls, and governance in my organization.“


Outreach Across PlatformsThe IIA is the internal audit profession’s global voice. As such, there were many opportunities for outreach in 2018. In addition to participating in regional meetings with Affiliates designed to strengthen collaboration and understanding on issues and initiatives, The IIA also participated in a United Nations-INTOSAI assembly on sustainability and in advisory groups of the International Ethics Standards Board for Accountants and the International Auditing and Assurance Standards Board. Part of the International Federation of Accountants, those boards advise on the process of standard-setting that impacts the activities of millions of accountants around the world, many of whom are also internal auditors and members of The IIA.

Important conversations also continue with the Anti-Fraud Collaboration, a group The IIA joined upon its formation in 2010, and the Professional Certification Coalition, which advocates against state legislative efforts that would undermine the recognition of certifications developed or offered by organizations such as The IIA.

Media outreach resulted in discussions on such hot topics as key risks, corporate culture, business disruption, and the #MeToo movement on CNBC and Bloomberg Radio, and in The Wall Street Journal, among other outlets.

In its continuing quest to provide relevant content to the profession, Internal Auditor magazine featured in its topical lineup articles on Ransomware, Information Distillation, Board Matters, and #MeToo, as well as its annual spotlight on Emerging Leaders. “Board Perspectives,” a new column focused on stakeholders, launched in February 2019. The magazine also added to its long list of awards with well-deserved recognition from Association Media & Publishing and the Florida Magazine Association.

Adding enhancement to the profession’s voice, albeit in a somewhat different way, was the launch in October of the Chapter Leader Portal. The portal offers an array of benefits to North American Chapters, including a new CAP 2.0 program, enhanced volunteer management, supported chapter communications, document storage, and discussion forums.

The Global Board also plans to launch a new board portal that will provide user-friendly and secure access to board materials.

There are few positions within a business that expose you to as

much breadth as internal audit. Every day feels like an education

as I work across all parts of the business, from human resources to operations. Similarly, internal audit

is a high-leverage position where we are able to make an impact in

the operations of the company and actually see these changes

implemented. Seeing progress made, based on your efforts, is

extremely rewarding. This would not be possible without being a

part of the Internal Audit team, an experience you can’t get in many

other departments. As an emerging leader, I look forward to exceeding

the expectations of The IIA and to continue leading the

profession forward.

Robin Noack, CIA, Audit Manager,

FHLBank Pittsburgh

Spotlight

play


Advancing the ProfessionPerhaps what’s most exciting about all The IIA accomplished in 2018 is that those successes provided a sturdy springboard from which to launch into 2019. The early part of 2019 saw the continuation of key initiatives designed to further advance The IIA’s vision put forth in the 2019–23 Global Strategic Plan to be the primary global resource for members and the internal audit profession.

Transitioning GovernanceEven as the first newly structured Global Board of Directors takes office in 2019, a Global Governance Task Force, under the leadership of the 2017–18 and 2018–19 Global Board chairs, has been working on the transition from Global Council to Global Assembly, which will gather for the first time in 2020 in London. The main goals of the enhanced model are to: elevate the voice and influence of The IIA’s 100-plus Affiliates; increase Affiliate accountability to The IIA and its Global Board; and enhance the effectiveness of the global governance process. Affiliates were provided an opportunity at the final Global Council in Tokyo to provide feedback on changes under consideration.

Global Council

brings together IIA leaders

from around the world.


Reviewing the Three Lines of DefenseAcknowledging changing stakeholder expectations and increasing complexities of organizations, The IIA, in collaboration with specialists in governance and risk management, launched an extensive review of the Three Lines of Defense, weighing the concept’s strengths, application, and usefulness toward ensuring its continued relevance in today’s operational climate. Based on feedback received from working and advisory groups engaged by The IIA, and after a period of public exposure, an updated Position Paper will be released in 2020.

What impact has the Three Lines of Defense had on the profession in your area?

Helped the profession

Based on responses from Global Council Survey

Learning From the Leader“Our place or your place. Our pace or your pace.” A catchy phrase that sums up the Training and Development department’s goal to offer training in a variety of convenient and flexible formats to suit the needs of practitioners. Whether your preference is for instructor-led courses hosted in a city close to you or online, or for self-directed learning via OnDemand training, The IIA stands ready to meet you where you are on your career path. Two additions to the lineup of OnDemand courses were based on recently released guidance — “Understanding and Auditing Big Data” and “Auditing IT Governance” — while a third, “Organizational Political Pressure,” was released in partnership with the Internal Audit Foundation.

After a successful pilot offering of OnDemand training in Africa, Asia, Europe, Latin America, the Middle East, and Canada, The IIA launched its Global Training Marketplace (GTM) to ensure OnDemand training is available to practitioners worldwide. Tied closely to the IPPF and the content of the updated CIA syllabus, the initial portfolio of eight courses emphasizes the fundamentals of internal auditing. GTM is expected to expand over the next three years with course offerings that will form a core curriculum for all internal auditors. The IIA is working closely with Affiliates, focusing on the business model, content, and design of the new training.

Additional efforts in 2019 will be directed at employing robust new tactics related to recruiting, retaining, and recognizing facilitators.

“ I follow The IIA’s Standards when providing assurance and advice.“

%


Adding Value to MembershipForward progress continues on the delivery of a meaningful and compelling Enhanced Membership Model. The revised membership structure scheduled to launch in 2020 includes membership tiers and benefits designed to better meet the needs of current members and to attract new members. The enhanced model was endorsed by the North American Board at the 2018 Midyear Meeting.

Given the ever-changing nature of the internal audit profession, listening to members’ needs is critical. The organization sought feedback via focus groups, member outreach calls, and analysis of member-needs assessments. The objective for The IIA is to create an enhanced membership model that will drive strong support, loyalty, and ultimately, growth opportunities. To that end, a renewed focus has been placed on personal outreach for welcoming and onboarding new members, with the idea that being a part of The IIA community reaps professional rewards.

Enhancing ConferencesNot content to rest on past successes, the Conferences team immediately began searching for ways to enhance 2019’s offerings with features that would help set an IIA conference apart from the rest. It is, after all, not just about what you hear from industry leaders, it’s about the entire experience. That’s how livestreaming — which, because of its success, will be introduced at other conferences — and industry meetups became a part of the 2019 GAM experience. Co-labs, where people can connect to collaborate and learn more about the profession, and a LinkedIn center and headshot station are among the offerings designed to engage members in new and compelling ways.

Driving Certifications The revised CIA exam, which launched in January 2019 in English, will be made available in French, Spanish, German, Turkish, Arabic, Russian, Korean, Portuguese, Chinese Traditional, Japanese, and Chinese Simplified. New marketing collateral — including the unveiling of a well-received promo video — a new North America chapter reengagement program, and further collaboration with global Affiliates will build on the momentum of the past year, and are expected to drive certifications higher still.

The IIA conducted a job analysis study of the Certification in Risk Management Assurance (CRMA) program in early 2019, and will release a revised CRMA exam syllabus later in the year. This follows the strategic repositioning in 2018 of two specialty certifications, the Certified Government Auditing Professional (CGAP) and the Certified Financial Services Auditor (CFSA), to assessment-based certificates, and the integration of the Certification in Control Self-Assessment (CCSA) into the CRMA certification.

“ I am respected and admired.“

1,000+NA CHAPTERS WITH

MEMBERS

(as of Feb. 28, 2019)

Atlanta – 1,940

Charlotte – 1,618

Chicago – 2,211

Dallas – 2,376

Denver – 1,174

Detroit – 1,271

Greater Boston – 1,685

Houston – 2,543

New York – 3,892

North Jersey – 1,136

Northern Virginia – 1,339

Ottawa – 1,190

Philadelphia – 1,786

San Francisco – 1,021

Toronto – 2,609

Twin Cities – 1,499

Washington, D.C. – 1,365

The appearance of Securities and Exchange Commissioner Hester Peirce at the 2019 GAM Conference underscores

The IIA’s advocacy efforts.

fast forward


The Transformation ContinuesIn an increasingly challenging global environment, where disruptions — positive as well as negative — are emerging at the speed of risk, The IIA’s mission to provide dynamic leadership for the global profession of internal auditing is more important than ever. Aside from the overarching role The IIA’s Digital Transformation will play in connecting the organization with its members, The IIA will continue to build awareness of the critical value of internal auditing as it charts a course for the future by providing comprehensive professional and educational opportunities and researching and disseminating the latest knowledge.

Advocating in North America and Around the GlobeNorth American Advocacy representatives continued to meet with members of the legislative and executive branches and other stakeholders to promote the profession and its essential role in strong corporate governance and organizational success. Because existing laws, regulations, and most other self-governing rules have proved insufficient, The IIA continues to pursue its position requiring U.S. publicly traded companies to disclose whether they have an internal audit function. To that end, IIA President and CEO Richard Chambers, IIA staff, and members held more than 124 meetings with SEC commissioners, congressional representatives and their staff, federal agencies, and other stakeholders to advocate for stronger disclosure requirements.

This initiative continues in 2019, as North American advocacy efforts remain focused on educating, informing, and gaining action on steps that must be taken to protect investors and stakeholders by improving governance in publicly traded companies.

Those efforts will be bolstered by the selection in 2019 of the law firm Covington & Burling to represent The IIA on federal legislative and regulatory matters. Well-respected in Washington, D.C., the firm has offices around the globe, including Beijing, Brussels, London, and Dubai. The firm is expected to provide a broader and deeper reach on advocacy issues as well as greater engagement with policymakers and other stakeholders.

On a global scale and in support of the advocacy efforts of IIA Affiliates, volunteers, members, and other internal audit practitioners and stakeholders, the Global Advocacy Platform had its official launch at the 2018 Global Council in Panama City, Panama. Taking its place in an advocacy lineup that includes position papers along with advocacy planning and maturity self-assessment tools, the Global Advocacy Platform offers six Pillars of Good Governance that capture in plain terms the central role internal auditing plays in helping organizations achieve their goals.

The appearance of Securities and Exchange Commissioner Hester Peirce at the 2019 GAM Conference underscores

The IIA’s advocacy efforts.


Planning for the FutureIn depicting its vision for the future of the organization, The IIA Global Strategic Plan 2019–23 offers a framework for bridging the journey from where the organization is in serving and empowering members globally to where it expects the profession to be by 2030. The 2024 vision for the organization is that The IIA is the primary global resource for members and the internal audit profession, enabling internal audit professionals to be recognized as critical to enhancing and protecting organizational value. By 2030, the vision for the profession is that internal audit professionals are universally recognized as indispensable to effective governance, risk management, and control.

To make those visions a reality, the strategic plan outlines three goals:

n A Stronger Profession that is made so by enabling IIA members to engage stakeholders and provide insight on risks impacting organizations.

n Competent Professionals able to deliver on stakeholder expectations and who demonstrate the value of our profession.

n Sustainable Global Value delivered to IIA members globally through a sustainable operating model.

A major initiative arising from the development of the 2019–23 Strategic Plan was the need for a Global Operating Model (GOM). A GOM Task Force will, over the course of the next couple of years, assess the way in which The IIA operates as a global network to serve its members and the profession, and prepare recommendations of future governance enhancements for consideration by the Global Board.

I joined The IIA as an international member in 2009, initially because it was a work requirement. But over time, the connection has become more than that, deepening my passion and commitment to the profession. That is what inspired me to lead the establishment of the IIA–Mongolia chapter.

Professional, competent, strong internal auditors contribute significantly to the formation of adequate governance, risk management, and internal controls that help all types of organizations and institutions meet their goals. I believe that if institutions within a country accomplish their goals, it contributes to the development of that country.

That is why I felt it was important to establish a chapter in my country of the professional institution that supports the development and advancement of the internal audit profession. In 2016, Mongolian internal auditors successfully formed the local professional chapter. Today, we have many committed members who are working to keep up with international knowledge, best practices, and professional development.

I am truly proud to have had the chance to build a new affiliate with valuable support from IIA Global and chapter colleagues.

Gantuul Palamdorj, IIA–Mongolia Chairman, Chief Audit Executive, Trade and Development Bank of Mongolia

Vision for The IIA Organization

IIA Vision 2024

The IIA is the primary global resource for members and the internal audit profession, enabling internal audit professionals to be recognized as critical to enhancing and protecting organizational value.

Spotlight


Building Capacity Work continues on the initiative to build support and capacity in Africa. The final research on internal auditing in Africa, conducted with The World Bank, was released. “The State of the Internal Audit Profession in Africa” evaluates the factors that contribute to the current status of the profession across 11 countries in Africa.

Major efforts also continue in Vietnam. IIA President and CEO Richard Chambers addressed almost 1,000 internal auditors in five different venues in Ho Chi Minh City and Hanoi during a visit to that region in August. The trip was viewed as a strong indicator of the important role The IIA plays in raising recognition of the profession in developing markets. In fact, in 2019, a decree was passed in Vietnam that mandates an internal audit function in the public sector and in all publicly listed companies.

Reaching the Next Generation Truly, the discussion of the future of any organization is not complete without giving due consideration to how it will provide the tools and resources necessary to attract the next generation and, in the case of The IIA, develop a pipeline of students eager to meet the growing demand for internal audit talent.

The Internal Auditing Education Partnership (IAEP) program endorses schools teaching an internal auditing curriculum within an undergraduate or graduate degree program. These universities educate and equip students to begin a career in internal auditing upon graduation. Forty-nine universities in 14 countries and territories are helping grow the leaders of tomorrow.

Since 2017, more than $250,000 in awards have been distributed by The IIA, IIA chapters, and the Internal Audit Foundation to universities and students around the world to advance internal audit education. This investment is paying off, as more and more talented students are hearing about and considering the wide world a career in internal auditing offers them.

My interest in pursuing a career in internal audit was truly sparked

during the IAEP Exchange in September 2018 when IIA Global

Chairman Naohiro Mouri said, “Internal auditors are catalysts

of change.” I love seeing how businesses work and looking

for improvements to enhance business value. Being active in my

school’s IAEP program allowed me to make connections and

build a strong network of internal audit professionals, giving me an

edge in my job search.

Beth White, Kennesaw State University,

Master of Accounting: Specialization in Audit (2019)

“ I serve my organization to protect and enhance its value.“

Spotlight


I am secretary of The IIA’s Memphis Chapter. When our president provided

additional information to chapter officers and the Board of Governors

about the Internal Audit Foundation and the work it is doing to further

initiatives within The IIA, I was moved to become a donor. One of the

initiatives mentioned was the new Sawyer’s book, which has been an important source for auditors over

the years. I have been a member of The IIA for more than 15 years, so I

am always happy to give back and support The IIA. I have benefited

from many sources of information — thought leadership pieces, Internal

Auditor magazine, website, books, etc. — provided by the organization, so I want to ensure that other auditors

have the same opportunities.

Sharonda Toney, CIA, Audit Advisor,

FedEx Services

Keying in on PublicationsBesides supporting major academic advancement initiatives through its numerous grants and scholarships, the Internal Audit Foundation, which is supported solely through donations, produced 13 key publications in 2018, including Applying the International Professional Practices Framework (IPPF) and The Internal Auditor’s Guide to Risk Assessment. The Foundation started 2019 off strong with the release of the 7th Edition of Sawyer’s Internal Auditing, which builds on Larry Sawyer’s legacy by looking at internal auditing from a business perspective. In further recognition of the book’s release, the Foundation will host the first Larry Sawyer Educators’ Symposium, to be held in conjunction with the 2019 International Conference.

Objectives of the symposium are threefold:

n Establish a forum for researchers to present end-stage or completed research and share aspects of classroom and practitioner applicability.

n Provide educators with new and innovative techniques for teaching internal auditing.

n Create an opportunity for researchers to present research concepts and proposals and receive feedback to refine the scope further to enhance value for practical application.

Also released in the first quarter was The Speed of Risk: Lessons Learned on the Audit Trail, 2nd Edition, authored by IIA President and CEO Richard F. Chambers. Twelve additional releases are expected in 2019.

Spotlight


It is clear from initiatives begun and completed in 2018 and

from those continuing into 2019 and beyond that disruption is

giving The IIA license to be more ambitious, more creative in

how it presents and delivers information to members. If utilized

correctly, disruption provides a great opportunity for The IIA to

do big things with the resources at its disposal.


SENIOR VICE CHAIRMAN OF THE BOARDJ. MICHAEL JOYCE JR., CIA, CRMAVice President, Chief Auditor, and Compliance Officer Blue Cross Blue Shield Association USA

2018–19 IIA Global Board of DirectorsExecutive Committee

CHAIRMAN OF THE BOARDNAOHIRO MOURI, CIAExecutive Vice President and Chief Auditor American International Group Japan

VICE CHAIRMAN – PROFESSIONAL GUIDANCESHANNON J. URBAN, CIA, CRMAExecutive Director EY USA

VICE CHAIRMAN – PROFESSIONAL PRACTICESJOHN BENDERMACHER, CIAChief Internal Auditor Euroclear SA Netherlands

VICE CHAIRMAN – FINANCECHARLES T. WRIGHT, CIAChief Risk Officer Jack Henry and Associates USA

VICE CHAIRMAN – RESEARCHMICHAEL J. FUCILLI, CIA, QIAL, CGAP, CRMAAuditor General Metropolitan Transportation Authority USA

VICE CHAIRMAN – GLOBAL SERVICESKAREM TOUFIC OBEID, CIA, CCSA, CRMAChief Audit Executive Tawazun Economic Council United Arab Emirates

IMMEDIATE PAST CHAIRMAN OF THE BOARDJ. MICHAEL PEPPERS, CIA, QIAL, CRMAChief Audit Executive University of Texas System USA

VICE CHAIRMAN – PROFESSIONAL CERTIFICATIONSJENITHA JOHN, CIA, QIALChief Audit Executive FirstRand Bank South Africa

PAST CHAIRMAN OF THE BOARDANGELA WITZANY, CIA, QIAL, CRMAHead of Internal Audit Sparkassen Versicherung AG Austria


DIRECTORS-AT-LARGE AND EX-OFFICIO DIRECTORS

ERIC N. ALLEGAKOEN, CIA, CCSA, CRMAVice President and Chief Audit Executive Adobe Systems USA

NARENDRA K. ANEJA, CIA, CRMAChief Executive Aneja Associates India

CHARLOTTA L. HJELM, CIA, QIALChief Internal Auditor Länsförsäkringar AB Sweden

ÁGÚST HRAFNKELSSON, CIA, CRMAChief Audit Executive Islandsbanki hf. Iceland

AUGUSTINO E. MBOGELLA, CIA, CCSA, CRMAChief Consultant GRC Solutions Ltd. United Republic of Tanzania

DORON ROZENBLUM, CIA, CRMA Control and Risk Management Kreston-EYR-Consulting Israel

RANJIT SINGH TARAM SINGH, CIA, CRMAGroup Executive Director Axcelasia Inc. Malaysia

RICHARD F. CHAMBERS, CIA, QIAL, CGAP, CCSA, CRMAPresident and CEO The Institute of Internal Auditors USA

INSTITUTE DIRECTORS

MARK CARAWAN, CIA, QIAL, CMIIACiti Chief Compliance Officer Citigroup United Kingdom

ORIANNE DUPRAT-BRIOU, CIADirector, Internal Audit Group CNP Assurances France

STEPHEN J. HORNE, CIA, CGAP, CRMAPrincipal Checks, Balances & Integrity Australia

ERNESTO MARTINEZ GOMEZ, CIA, CRMASenior Vice President, Corporate Internal Audit Banco Santander Spain

JAN PETRUS OPPERMAN, CIA, CRMAChief Audit Executive Steinhoff International South Africa

MARCO PETRACCHINI, CIA, CRMASenior Executive Vice President ENI Italy

JUERGEN ROHRMANN, CIADirector Union Fonds Holding AG Germany

RENATO TRISCIUZZI, CIA, QIAL, CCSA, CRMAChief Audit Executive Transpetro - Petrobras Transporte, S.A. Brazil

QING (JOY) XIA, CIA, CRMAVice President, Auditing Department China Unionpay Merchant Services China

HAJIME YOSHITAKE, CIA, CCSA, CFSA, CRMAChair, Corporate Audit Committee Saitama Resona Bank, Ltd Japan

NORTH AMERICAN DIRECTORS

KAREN BRADY, CIA, CRMAVice President and Chief Compliance Officer Baptist Health South Florida USA

NEIL FRIESER, CIAVice President, Internal Audit Frontier Communications USA

NANCY HAIG, CIA, CCSA, CFSA, CRMADirector, Internal Audit and Compliance Alvarez & Marsal USA

JULIE LATHROP, CIA, CRMANorth America Controller HP Inc. USA

MICHAEL LEVY, CIA, CRMADirector, Internal Audit Student Transportation Inc. USA

SETH PETERSON, CIA, QIAL, CRMAAVP, Internal Audit Manager The First National Bank in Sioux Falls USA

THOMAS SANGLIER, II, CIA, CRMASenior Director, Internal Audit Raytheon Company USA

LAURA SOILEAU, CIA, CRMAPartner Postlethwaite & Netterville USA

BEILI WONG, CIAVice President, Audit and Risk, Chief Audit Executive Liquor Control Board of Ontario Canada

BENITO YBARRA, CIAChief Audit and Compliance Officer Texas Department of Transportation USA


2018 Financial Discussion and AnalysisAs The Institute of Internal Auditors reviews its 2018 fiscal position, it is pleased to outline the financial performance that supported the aforementioned achievements.

For the 12-month period ending Dec. 31, 2018, total revenue was $65.6 million for The Institute of Internal Auditors, Inc., and related entities (IIA). That represented an increase of $4.7 million (7.7 percent) from 2017. Change in net assets (net contribution) was $1.1 million in 2018, a decrease of $5.5 million (83.1 percent) from 2017.

In 2018, The IIA experienced revenue growth in certifications of 17.7 percent and learning solutions of 11.3 percent.

The IIA also tracks revenue, expenses, and net contribution by geographic segment between North American Operations and Global Operations. For the 12-month period ending Dec. 31, 2018, total revenue for North American Operations was $38.9 million, while net contribution was $822,000. For Global Operations, total revenue was $26.1 million, while net contribution was $3.1 million.

As a result of the strong financial performance, The IIA ended 2018 with $20.8 million in cash. That represented a year-over-year increase of $181,000 (0.9 percent).

During 2018, The IIA continued its practice to reinvest prior-year net contribution into improving the products and services offered to its members. In 2018, The IIA committed $7.0 million into capital-related projects, bringing the two-year (2017–18) total investment to $8.2 million.

The IIA’s investment portfolio in 2018 decreased from $47.4 million to $44.3 million, primarily as a result of unrealized losses, which were partially offset by dividends, interest income, and realized gains. Overall, the investment portfolio has performed consistent with expectations, given the conservative nature of an investment policy that was revised in March 2017.

Total net assets in 2018 for The IIA were $57.0 million, compared with $55.9 million in 2017.

(All monetary figures represent U.S. dollars).

TOTAL REVENUE

$65.6 million

$60.9 million

2018

2017

NET CONTRIBUTION

$1.1million

$6.6million

2018

2017

TOTAL NET ASSETS

$57.0 million

$55.9 million

20182017


Independent Auditor’s ReportBoard of Directors The Institute of Internal Auditors, Inc. and Affiliates

Report on the Financial Statements We have audited the accompanying consolidated financial statements of The Institute of Internal Auditors, Inc. and Affiliates, which comprise the consolidated statements of financial position as of December 31, 2018 and 2017, the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Institute of Internal Auditors, Inc. and Affiliates as of December 31, 2018 and 2017, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter – Change in Accounting As discussed in Note 1 to the accompanying financial statements, The Institute of Internal Auditors, Inc. and Affiliates adopted Auditing Standards Update (ASU) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. Our opinion is not modified with respect to this matter.

Other Matter – Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying consolidating statement of financial position, consolidating statement of activities, and consolidated statement of functional expenses is presented for purposes of additional analysis and is not a required part of the financial statements and is presented for the current period only. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

RSM US LLP Orlando, Florida | April 5, 2019


The Institute of Internal Auditors, Inc. and AffiliatesCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31, 2018 and 2017

2018 2017

ASSETS

Cash $ 20,765,756 $ 20,585,111

Investments 44,297,580 47,378,802

Accounts receivable, net 4,577,876 2,412,738

Prepaid expenses and other assets 3,307,215 2,847,584

Property and equipment, net 4,083,704 4,437,547

Deferred project costs, net 2,675,999 1,192,613

Employee savings plans 715,504 1,819,463

Total assets $ 80,423,634 $ 80,673,858

LIABILITIES AND NET ASSETS

LIABILITIES

Accounts payable and accrued expenses $ 7,904,630 $ 8,246,860

Deferred revenue 12,541,804 12,331,642

Deferred employee compensation 715,504 1,819,463

Other liabilities 2,242,860 2,377,358

Total liabilities 23,404,798 24,775,323

Commitments and contingencies (Notes 4, 7 and 8)

NET ASSETS

Without donor restrictions:

Undesignated 55,304,708 54,473,920

Board designated for specified purposes 918,139 705,664

Total without donor restrictions 56,222,847 55,179,584

With donor restrictions:

Restricted for specified purposes 660,989 583,951

Restricted in perpetuity - endowment 135,000 135,000

Total with donor restrictions 795,989 718,951

Total net assets 57,018,836 55,898,535

Total liabilities and net assets $ 80,423,634 $ 80,673,858

See notes to consolidated financial statements.


The Institute of Internal Auditors, Inc. and AffiliatesCONSOLIDATED STATEMENTS OF ACTIVITIES

Years Ended December 31, 2018 and 2017

2018 2017

CHANGE IN NET ASSETS WITHOUT DONOR RESTRICTIONS

REVENUESLearning solutions $ 22,311,900 $ 20,043,070 Certifications 18,856,376 16,021,109 Membership 17,757,718 17,722,285 Educational products and research 2,170,206 2,273,460 Quality services 2,152,833 1,937,538 Dividend and interest income, net 1,185,740 851,184 Other revenues 712,142 1,473,625 Contributions 435,175 441,050 Net assets released from restrictions 32,270 136,133

Total revenues 65,614,360 60,899,454

EXPENSES

PROGRAM SERVICESLearning solutions 16,457,294 15,311,322 Certifications 10,221,735 9,450,736 Membership 7,608,872 8,972,491 Educational products and research 2,019,677 2,218,133 Quality services 1,194,120 1,280,778 Other program services 280,092 495,514

Total program services 37,781,790 37,728,974

SUPPORTING SERVICESGeneral and administrative 22,502,836 20,649,411 Fundraising - 12,858

Total supporting services 22,502,836 20,662,269

Total expenses 60,284,626 58,391,243

OTHER CHANGES

Net realized and unrealized (losses) gains on investments (4,207,626) 4,136,430

Change in net assets without donor restrictions 1,122,108 6,644,641

CHANGE IN NET ASSETS WITH DONOR RESTRICTIONS

Contributions 46,149 123,555 Dividend and interest income, net 6,497 5,172 Net realized and unrealized losses on investments (22,183) - Net assets released from restrictions (32,270) (136,133)

Change in net assets with donor restrictions (1,807) (7,406)

Change in net assets 1,120,301 6,637,235

NET ASSETS

Beginning of year 55,898,535 49,261,300

End of year $ 57,018,836 $ 55,898,535



The Institute of Internal Auditors, Inc. and AffiliatesCONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2018 and 2017

2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Cash received from members and customers $ 62,487,523 $ 58,749,956

Cash paid for program and supporting services (59,226,910) (53,519,292)

Investment income received 1,192,237 860,406

Net cash provided by operating activities 4,452,850 6,091,070

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sales of investments 3,299,054 46,408,269

Purchases of investments (4,447,641) (47,321,721)

Purchases of property and equipment (1,344,901) (2,536,649)

Expenditures for deferred project costs (1,778,717) (453,020)

Net cash used in investing activities (4,272,205) (3,903,121)

Net increase in cash 180,645 2,187,949

CASH

Beginning of year 20,585,111 18,397,162

End of year $ 20,765,756 $ 20,585,111



The Institute of Internal Auditors, Inc. and AffiliatesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Institute of Internal Auditors, Inc. (the Institute), was formed in 1941 as a not-for-profit corporation, to cultivate, promote, and disseminate knowledge and information concerning internal auditing and related subjects.

The Institute’s primary program activities include conducting seminars and conferences to educate and train internal auditors; publishing and selling periodicals and materials which inform internal auditors and members of the Institute on current professional issues, standards, and practices; offering examinations and certifications to internal auditors; and evaluating the performance of internal audit departments.

In conformity with accounting principles generally accepted in the United States of America (U.S. GAAP), the Institute’s consolidated financial statements include the accounts of the following organizations, which are separate legal entities (collectively, referred to as the Organization):

n Internal Audit Foundation (the Foundation), a not-for-profit corporation formed to expand knowledge and understanding of internal auditing by providing relevant research and educational products to advance the profession globally. The Institute’s Board of Directors has the authority to appoint the members of the Foundation’s governing body.

n IIA Quality Services, LLC (Quality Services), a Florida limited liability company organized for the purpose of conducting external quality assessments and related activities. The Institute is the sole member of Quality Services.

n Canadian Institute of Internal Auditors (the Canadian Institute), a not-for-profit Canadian corporation formed to cultivate, promote, and disseminate knowledge and information concerning internal auditing and related subjects in Canada. The Institute controls the Canadian Institute by virtue of provisions contained in the Canadian Institute’s governing documents. Due to the amount of activity within the Canadian Institute, the activities and balances are included in the financial statements of the Institute in the accompanying consolidating statement of financial position and the accompanying consolidating statement of activities.

n The Board of Environmental Health & Safety Auditor Certifications (BEAC), a Virginia not-for-profit corporation formed for the purpose of issuing professional certifications relating to environmental, health, and safety auditing and related activities. The Institute’s Board of Directors has the authority to appoint the members of BEAC’s governing body. Due to the amount of activity within BEAC, the activities and balances are included in the financial statements

of the Institute in the accompanying consolidating statement of financial position and the accompanying consolidating statement of activities.

n SINO Certifications, LLC (SINO), a Florida limited liability company organized for the purpose of conducting certification and related activities in China. The Institute is the sole member of SINO. Due to the amount of activity within SINO, the activities and balances are included in the financial statements of the Institute in the accompanying consolidating statement of financial position and the accompanying consolidating statement of activities.

All significant intercompany balances and transactions have been eliminated in consolidation.

A summary of the Organization’s significant accounting policies follows:

Basis of presentation: The accompanying consolidated financial statements have been prepared on the accrual basis of accounting.

A not-for-profit organization is required to report information regarding its financial position and activities according to two classes of net assets: without donor restrictions and with donor restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows:

Net assets without donor restrictions: Net assets that are not subject to donor-imposed stipulations, but may be designated for specific purposes by action of the Board of Directors. The Board of Directors established a board designated fund for specified purposes. As of December 31, 2018 and 2017, $918,139 and $705,664, respectively, had been designated by the Board of Directors for these purposes.

Net assets with donor restrictions: Net assets subject to donor-imposed stipulations that may or will be met either by actions of the Organization, passage of time, or permanently maintained by the Organization.

Net assets with donor restrictions restricted for specified purposes at December 31, 2018 and 2017, were $660,989 and $583,951, respectively. Net assets with donor restrictions restricted in perpetuity – endowment were $135,000 at December 31, 2018 and 2017 and consist of an endowment fund held by the Foundation, the distributions from which are to be used for scholarships for internal auditing students.

Net assets with donor restrictions subject to expenditure for specified purpose at December 31, 2018 and 2017, consist primarily of amounts held by the Foundation restricted for educational activities and the William G. Bishop Memorial Fund to be used for the Common Body of Knowledge program. As of December 31, 2018 and 2017, net assets of


$32,270 and $136,133, respectively, were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors.

Revenue recognition and operating activities: The Organization recognizes revenue and incurs expenses in its operation for the following activities:

Learning solutions: Conference and seminar fees are recognized as income in the period in which the event is completed. Expenses include the direct costs of conducting conferences and seminars. Webinar revenue is recognized as income in the period in which the webinar is completed, or ratably throughout the life of the subscription. Expenses include the direct costs of creating and conducting the webinars.

Certifications: Exam registration fees are recognized as income in the period in which the exams are taken. Application fees are nonrefundable and are recognized as income when received. Expenses include the direct costs of conducting exams.

Membership: Membership dues are recognized as income ratably throughout the membership period, which is generally one year. Expenses include the direct costs of delivering member benefits, as well as costs associated with recruiting new members and servicing and retaining existing members worldwide.

Membership includes subscriptions and print advertising revenue which are recognized as income in the period in which the related publications are issued. Website advertising revenue is recognized as advertisement is placed.

Membership also includes revenue from Global Auditing Information Network (GAIN) subscription fees and Audit Executive Center (AEC) membership dues. GAIN subscription fees are recognized as income ratably over the life of the subscription. One-time purchases are recognized as income when the product is shipped. Expenses include fulfillment of GAIN subscriptions. GAIN is a knowledge exchange forum available to member organizations of the Institute.

AEC membership dues are recognized ratably throughout the membership period, which is generally one year. Expenses include the direct costs of delivering member benefits, as well as costs associated with recruiting new members and servicing and retaining existing members worldwide.

Educational products and research: Educational product sales are recognized as income when the related inventory is shipped. Expenses include the direct costs of producing and delivering publications and educational products, as well as website maintenance. Advertising costs are expensed as incurred.

Quality services: Quality services are recognized as income in the period in which the engagement is completed. Expenses include the direct costs of conducting quality assessments.

General and administrative: Expenses include executive operations, shared services, including professional practices, and direct costs of creating and maintaining authoritative guidance organized in the International Professional Practices Framework. There is no direct revenue generated from general and administrative; rather, these costs support other sources of revenue.

Other activities: During 2018 and 2017, the Foundation reimbursed the Institute for certain personnel-related costs and certain shared costs. Such reimbursements are reflected as expenses of the Foundation based on the nature of the specific expenses.

Additionally, the Institute absorbs certain overhead costs of the Foundation, for which reimbursement is not required. These activities are reflected within contributions in the accompanying consolidating statement of activities.

Revenue received in advance of the recognition period is included in deferred revenue in the accompanying statements of financial position. Deferred revenue consists primarily of membership and certification fees not yet earned and fees for upcoming conferences.

Contributions: Contributions received are recorded as net assets without donor restrictions or net assets with donor restrictions depending on the existence and/or nature of any donor restrictions at fair value. All donor restricted contributions are reported as an increase in net assets with donor restrictions, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the accompanying consolidated statements of activities as net assets released from restrictions.

Contributed services are recognized and reported at fair value in the period received, if the services received create or enhance non-financial assets or require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by contribution. There were no contributed services for the years ended December 31, 2018 and 2017.

Cash and cash equivalents: For purposes of the statements of cash flows, the Organization considers all short-term securities purchased with an original maturity of three months or less to be cash equivalents. The Organization’s cash and cash equivalent accounts maintained in brokerage accounts are considered investments by the Organization.

The Organization maintains its cash and cash equivalents in deposit accounts and money market funds which may not be federally insured, may exceed federally insured limits, or may be insured by an entity other than an agency of the federal government. The Organization has not experienced any losses in such accounts and believe they are not exposed to any significant credit risk related to cash and cash equivalents.

NOTE 1. NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)


Investments and investment income: Investments are reported at fair value (see Note 2). Realized gains and losses are recorded at date of disposition based on the difference between the net proceeds received and the cost of the investments sold, using the specific identification method. Unrealized gains and losses are reported for the changes in fair value between reporting periods. Interest and dividends income is recognized when earned. Gains and losses on investments are reported as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulation or by law.

Accounts receivable: Accounts receivable are stated at net realizable value. The Organization uses the allowance method to determine uncollectible accounts receivable. The allowance for doubtful accounts is estimated based on an analysis of specific accounts and other economic factors, taking into consideration the age of the past due account and an assessment of the member’s or customer’s ability to pay. Accounts are considered past due when payments are not made in accordance with specified terms. Accounts are written off when management determines the amounts are uncollectible. In the opinion of management, the allowance for uncollectible accounts of $41,867 and $29,411 at December 31, 2018 and 2017, respectively, reflects management’s best estimate of uncollectible accounts.

Property and equipment: Property and equipment are recorded at cost when purchased or at fair value at the date of gift, if contributed. Depreciation of property and equipment is computed using the straight-line method of accounting over the estimated useful lives of the depreciable assets. Routine maintenance and repair costs are charged to expense as incurred, while major replacements and improvements are capitalized as additions to the related assets. When assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts and gains or losses from dispositions are credited or charged to income. Amortization of leasehold improvements is provided on the straight-line method of accounting over the remaining term of the lease or the useful life of the improvement, whichever is shorter.

Impairment of long-lived assets: The carrying value of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate such value may not be recoverable. Recoverability of assets or asset groups to be held and used is measured by a comparison of the carrying amount of an asset or asset group to future net cash flows expected to be generated by the asset or asset group. If such assets or asset groups are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets or asset group. Assets or asset groups to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. No impairment of the Organization’s long-lived assets or asset groups has been recognized during the years ended December 31, 2018 and 2017.

Deferred project costs: Costs related to curriculum development, technology improvements, and educational product development or revision are deferred until

the related projects are completed. Seminar costs are amortized over three years using the straight-line method of accounting, and educational product development or revision costs over three years at 60% the first year, 30% the second year, and 10% the third year.

Functional allocation of expenses: The costs of providing the various programs and supporting services have been summarized on a functional basis in the accompanying consolidated statements of activities. Expenses of the Organization are charged directly to a specific program or supporting services.

Use of estimates: The presentation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income taxes: The Institute and BEAC are exempt from federal income tax under Internal Revenue Code Section 501(a) as organizations described in Section 501(c)(6) and from state income tax pursuant to state law. The Foundation is exempt from federal income tax under Internal Revenue Code Section 501(a) as organizations described in Section 501(c)(3) and from state income tax pursuant to state law. Quality Services and SINO are treated as disregarded entities for federal tax purposes. The Canadian Institute is exempt from taxation under applicable Canadian law.

The Organization follows accounting standards relating to accounting for uncertainty in income taxes. Management assessed whether there were any uncertain tax positions which may give rise to income tax liabilities and determined that there were no such matters requiring recognition in the accompanying consolidated financial statements. Generally, the Organization is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before December 31, 2015.

Recent accounting pronouncements: In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The update will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. The updated standard will become effective for annual reporting periods beginning after December 15, 2018. The Organization has not yet selected a transition method and is currently evaluating the impact of this ASU on its consolidated financial statements.

In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term


NOTE 1. NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

(Continued)

leases) at the commencement date: (a) A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees will no longer be provided with a source of off-balance-sheet financing. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. Nonpublic entities should apply the amendments for fiscal years beginning after December 15, 2019. The Organization is currently evaluating the impact of this ASU on its consolidated financial statements.

The FASB has issued certain new or modifications to, or interpretations of, existing accounting guidance in addition to the ASUs described above. The Organization has considered the new pronouncements and does not believe that any other new or modified guidance will have a material impact on the Organization’s reported financial position or activities in the near term.

Change in accounting: In August 2016, the FASB issued ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. ASU No. 2016-14 changes presentation and disclosure requirements for not-for-profit entities to provide qualitative and quantitative requirements as follows:

n Net assets presentation in two categories – net assets without donor restrictions and net assets with donor restrictions;

n Presentation of investment income net of investment expenses;

n Analysis of expenses by both natural and functional classification;

n Liquidity and availability of resources disclosure requirement;

n Presentation of operating cash flows either direct or indirect method; permits the use of direct method without reconciliation of change in net assets to net cash flows from operating activities.

As the result of ASU No. 2016-14 adoption, the Organization has adjusted the presentation of these consolidated financial statements accordingly. The ASU has been applied retrospectively to all periods presented.

Subsequent events: Management has assessed subsequent events through April 5, 2019, the date the consolidated financial statements were available to be issued.

NOTE 2. INVESTMENTS AND FAIR VALUE MEASUREMENTS

The fair value of investments at December 31, 2018 and 2017, consists of the following:

2018 2017

Cash and cash equivalents $ 1,258,596 $ 3,021,232

Equity securities – common stocks

- 2,785,469

Mutual funds 43,038,984 41,572,101

$ 44,297,580 $ 47,378,802

The Organization follows accounting standards relating to fair value measurements which defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standards relating to fair value measurements establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Investments recorded at fair value in the accompanying statements of financial position are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Level inputs, as defined by this guidance, are as follows:

Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data.

In determining the appropriate levels, the Organization performs a detailed analysis of the assets and liabilities that are measured and reported on a fair value basis. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.


The following tables summarize the fair value measurements by level measured on a recurring basis as of December 31, 2018 and 2017:

2018

Fair Value Measurements Using

Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 1,258,596 $ - $ - $ 1,258,596

Mutual Funds

U.S. fixed income 18,797,319 - - 18,797,319

U.S. large cap equity fund 7,509,546 - - 7,509,546

EAFE equity fund 3,618,447 - - 3,618,447

Real estate and infrastructure 2,667,530 - - 2,667,530

Emerging market equity fund 2,345,858 - - 2,345,858

Multisector bond fund 2,179,131 - - 2,179,131

Asia ex-Japan equity fund 918,517 - - 918,517

Japanese large cap equity fund 1,238,712 - - 1,238,712

Equity precious metals fund 802,685 - - 802,685

European large cap equity fund 423,129 - - 423,129

U.S. mid cap equity fund 2,213,045 - - 2,213,045

Allocation equity fund 325,065 - - 325,065

$ 44,297,580 $ - $ - $ 44,297,580

2017

Fair Value Measurements Using

Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 3,021,232 $ - $ - $ 3,021,232

Equity securities – common stocks

(U.S. large cap equity) 2,785,469 - - 2,785,469

Mutual Funds

U.S. fixed income 18,845,108 - - 18,845,108

U.S. large cap equity fund 4,788,564 - - 4,788,564

EAFE equity fund 4,234,911 - - 4,234,911

Real estate and infrastructure 2,547,792 - - 2,547,792

Emerging market equity fund 2,452,941 - - 2,452,941

Multisector bond fund 2,340,634 - - 2,340,634

Asia ex-Japan equity fund 1,524,379 - - 1,524,379

Japanese large cap equity fund 1,470,711 - - 1,470,711

Equity precious metals fund 1,278,541 - - 1,278,541

European large cap equity fund 888,353 - - 888,353

U.S. mid cap equity fund 857,033 - - 857,033

Allocation equity fund 343,134 - - 343,134

$ 47,378,802 $ - $ - $ 47,378,802

Shares of equities are valued based on the quoted market price of the stock on active markets as of the valuation date. Shares of mutual funds are valued based on the quoted market price of the fund on active markets as of the valuation date, which represents the net asset value of shares held by the Organization.


NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2018 and 2017:

2018 2017

Furniture, equipment and other $ 8,544,695 $ 8,570,705

Leasehold improvements 2,344,546 2,344,546

10,889,241 10,915,251

Less accumulated depreciation (6,805,537) (6,477,704)

$ 4,083,704 $ 4,437,547

Depreciation expense for the years ended December 31, 2018 and 2017 was $1,349,272 and $1,228,735, respectively.

NOTE 4. OPERATING LEASES

The Organization leases office space and office equipment under operating leases expiring through April 1, 2027. Future annual minimum lease payments due under these operating leases as of December 31, 2018, are as follows:

Years Ending December 31:

2019 $ 1,344,560

2020 1,325,036

2021 1,348,233

2022 1,363,650

2023 1,375,766

Thereafter 4,785,454

$ 11,542,699

Total rent expense related to all leases and additional amounts for short-term rentals and related charges amounted to approximately $2,453,000 and $2,237,000 for the years ended December 31, 2018 and 2017, respectively.

NOTE 5. RELATED PARTY TRANSACTIONS

Payments to affiliates primarily represent payments for certification revenue sharing with other affiliates and amounted to approximately $4,541,000 and $3,806,000 during the years ended December 31, 2018 and 2017, respectively.

NOTE 6. LIQUIDITY AND AVAILABILITY OF RESOURCES

As of December 31, 2018, the following reflects the Organization’s financial assets, reduced by amounts not available for general use because of contractual or donor-imposed restrictions, board designations, and amounts set aside for operating reserve within one year of December 31, 2018.

2018

FINANCIAL ASSETS, AT YEAR-END

Cash $ 20,765,756

Investments 44,297,580

Accounts receivable, net 4,577,876

Less those unavailable for general expenditures within one year, due to:

Contractual or donor-imposed restrictions:

Restricted by donors with purpose restrictions

(660,989)

Restricted by donors in perpetuity (135,000)

Board designations:

Board designated for academic advancement

(695,071)

Board designated for research (223,068)

Amounts set aside for operating reserve (13,249,469)

Financial assets available to meet cash needs for general expenditures within one year

$ 54,677,615

Operating funds: Cash and cash equivalents should be convertible to cash within three months. The Organization maintains operating funds, which when added to the accounts receivable balance at the quarterly review date, will be equal to or greater than the balances in accounts payable and accrued expenses for the same time period.

At the end of each quarter, any balance in operating funds, in excess of the balances calculated above, may be transferred to the investment/portfolio account.

Restricted (reserve) funds: The Organization maintains reserve funds at the periodic review date equal to or greater than the total amount of operating costs for the Organization for the succeeding three months, calculated from the income statement forecast prepared at the review date.

If the balance in the reserve fund is not sufficient to meet the succeeding three months of expenses, investments can be liquidated to fund the deficit.

Investment funds: The amount of funds in excess of the reserve fund requirements is available for investments, projects, or other initiatives approved in accordance with the delegation of authority.


NOTE 7. RETIREMENT PLANS

The Institute participates in a defined contribution pension plan organized under Section 401(k) of the Internal Revenue Code. The Institute contributes a certain percentage of the total salary of eligible employees to the plan. During the years ended December 31, 2018 and 2017, the Institute contributed approximately $1,602,000 and $1,550,000, respectively, to this retirement plan.

The Institute maintains Section 457 deferred compensation plans for the benefit of certain employees. One plan permits employee salary deferral contributions, while another plan permits discretionary employer contributions. Employer contributions were $295,000 and $260,000 during years ended December 31, 2018 and 2017, respectively. The Institute held $715,504 and $1,819,463 in the plans as of December 31, 2018 and 2017, respectively, which is reflected in the accompanying consolidated statements of financial position as employee savings plans and deferred employee compensation.

NOTE 8. COMMITMENTS AND CONTINGENCIES

The Foundation has entered into contracts and agreements with various parties for research projects. Unpaid commitments related to these contracts and agreements totaled approximately $235,000 as of December 31, 2018.

Litigation: The Organization is involved in lawsuits in the normal course of business. Management cannot predict the outcome of the lawsuits or estimate the amount of any loss that may result. Accordingly, no provision for any contingent liabilities that may result has been made in the consolidated financial statements. Management believes that losses resulting from these matters, if any, would not have a material adverse effect on the financial position or results of operations of the Organization.

The Institute of Internal Auditors, Inc. and AffiliatesCONSOLIDATING STATEMENT OF FINANCIAL POSITION

December 31, 2018

The Institute of Internal

Auditors, Inc.

Internal Audit Foundation

IIA Quality Services, LLC Eliminations Total

ASSETS

Cash $ 18,769,971 $ 1,656,394 $ 339,391 $ - $ 20,765,756

Investments 41,607,605 2,689,975 - - 44,297,580

Due from affiliates 287,647 - - (287,647) -

Accounts receivable, net 3,736,674 202,149 639,053 - 4,577,876

Prepaid expenses and other assets 3,098,081 197,156 11,978 - 3,307,215

Property and equipment, net 4,067,997 15,707 - - 4,083,704

Deferred project costs, net 2,478,125 197,874 - - 2,675,999

Employee savings plans 715,504 - - - 715,504

Total assets $ 74,761,604 $ 4,959,255 $ 990,422 $ (287,647) $ 80,423,634

LIABILITIES AND NET ASSETS

Liabilities:

Accounts payable and accrued expenses $ 7,662,817 $ 180,055 $ 61,758 $ - $ 7,904,630

Due to affiliates - 125,437 162,210 (287,647) -

Deferred revenue 12,501,998 17,786 22,020 - 12,541,804

Deferred employee compensation 715,504 - - - 715,504

Other liabilities 2,242,860 - - - 2,242,860

Total liabilities 23,123,179 323,278 245,988 (287,647) 23,404,798

Net Assets:

Without donor restrictions:

Undesignated 51,638,425 2,921,849 744,434 - 55,304,708

Board designated for specified purposes - 918,139 - - 918,139

Total without donor restrictions 51,638,425 3,839,988 744,434 - 56,222,847

With donor restrictions:

Restricted for specified purposes - 660,989 - - 660,989

Restricted in perpetuity - endowment - 135,000 - - 135,000

Total with donor restrictions - 795,989 - - 795,989

Total net assets 51,638,425 4,635,977 744,434 - 57,018,836

Total liabilities and net assets $ 74,761,604 $ 4,959,255 $ 990,422 $ (287,647) $ 80,423,634


The Institute of Internal Auditors, Inc. and AffiliatesCONSOLIDATING STATEMENT OF ACTIVITIES

Year Ended December 31, 2018

The Institute of Internal

Auditors, Inc.

Internal Audit Foundation

IIA Quality Services, LLC Eliminations Total

CHANGE IN NET ASSETS WITHOUT DONOR RESTRICTIONS

REVENUES

Learning solutions $ 22,311,900 $ - $ - $ - $ 22,311,900

Certifications 18,856,376 - - - 18,856,376

Membership 17,757,718 - - - 17,757,718

Educational products and research - 2,170,206 - - 2,170,206

Quality services - - 2,152,833 - 2,152,833

Dividend and interest income, net 1,123,717 62,023 - - 1,185,740

Other revenues 725,806 - - (13,664) 712,142

Contributions - 1,071,042 - (635,867) 435,175

Net assets released from restrictions - 32,270 - - 32,270

Total revenues 60,775,517 3,335,541 2,152,833 (649,531) 65,614,360

EXPENSES

PROGRAM SERVICES

Learning solutions 16,457,294 - - - 16,457,294

Certifications 10,221,735 - - - 10,221,735

Membership 7,608,872 - - - 7,608,872

Educational products and research - 2,019,677 - - 2,019,677

Quality services - - 1,207,784 (13,664) 1,194,120

Other program services 280,092 - - - 280,092

Total program services 34,567,993 2,019,677 1,207,784 (13,664) 37,781,790

SUPPORTING SERVICESGeneral and administrative 21,501,912 1,162,566 553,070 (714,712) 22,502,836

Total supporting services 21,501,912 1,162,566 553,070 (714,712) 22,502,836 Total expenses 56,069,905 3,182,243 1,760,854 (728,376) 60,284,626

OTHER CHANGES

Net realized and unrealized losses on investments

(3,973,728) (233,898) - - (4,207,626)

Change in net assets without donor restrictions

731,884 (80,600) 391,979 78,845 1,122,108

CHANGE IN NET ASSETS WITH DONOR RESTRICTIONS

Contributions - 124,994 - (78,845) 46,149 Dividend and interest income, net - 6,497 - - 6,497 Net realized and unrealized losses on investments

- (22,183) - - (22,183)

Net assets released from restrictions - (32,270) - - (32,270) Change in net assets with donor restrictions

- 77,038 - (78,845) (1,807)

Change in net assets 731,884 (3,562) 391,979 - 1,120,301

NET ASSETS

Beginning of year 50,906,541 4,639,539 352,455 - 55,898,535 End of year $ 51,638,425 $ 4,635,977 $ 744,434 $ - $ 57,018,836


The Institute of Internal Auditors, Inc. and AffiliatesCONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

Year Ended December 31, 2018

PROGRAM SERVICES SUPPORTINGSERVICES

LearningSolutions Certifications Membership

EducationalProducts

and Research

QualityServices

OtherProgramServices

TotalProgramServices

Generaland

AdministrativeTotal

Expenses

Salaries and related benefits

$ 3,620,541 $ 2,303,062 $ 3,623,548 $ 483,158 $ 286,340 $ 104,148 $ 10,420,797 $ 14,737,578 $ 25,158,375

Contract services and professional fees

4,190,887 3,774,692 683,542 167,951 805,998 111,973 9,735,043 1,390,590 11,125,633

Travel, lodging, meals and meeting space

5,585,073 201,702 720,230 64,931 34,230 - 6,606,166 1,555,497 8,161,663

Occupancy, office and other expenses

1,777,884 766,124 1,566,356 391,936 51,922 20,118 4,574,340 3,303,731 7,878,071

Advertising and promotions

625,057 26,233 10,882 45,200 5,000 - 712,372 583,117 1,295,489

Publishing costs

- - - 480,188 - - 480,188 - 480,188

Payments to affiliates

494,416 3,093,916 705,873 235,769 10,630 - 4,540,604 - 4,540,604

Depreciation and amortization

163,436 56,006 298,441 150,544 - 43,853 712,280 932,323 1,644,603

Total $ 16,457,294 $ 10,221,735 $ 7,608,872 $ 2,019,677 $ 1,194,120 $ 280,092 $ 37,781,790 $ 22,502,836 $ 60,284,626


Management’s Annual Report on Internal Control Over Financial ReportingManagement is responsible for the preparation, integrity, and fair presentation of the accompanying financial statements. The accompanying statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis and are not affected by material fraud or error. The financial statements include amounts that are based on management’s best estimates and judgments.

Management also prepared the supplemental information in the annual report and is responsible for its accuracy and consistency with the financial statements. The financial statements have been audited by RSM US LLP, independent certified public accountants, selected by the Board of Directors. Management has made available to RSM US LLP all financial records and related data as well as the minutes of Board of Directors meetings. Management believes that all representations made to RSM US LLP during its audit were valid and appropriate.

Management maintains a system of internal control, which is designed to provide reasonable assurance as to: the preparation and publication of reliable and accurate financial statements; safeguarding of assets against unauthorized acquisition, use, or disposition; and compliance with applicable laws and regulations. The system includes a documented organizational structure and division of responsibility, established policies and procedures 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, and development of our people.

Management has voluntarily elected to evaluate its system of internal control in accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the COSO framework and has documented and tested the key processes used to record activities and prepare the appropriate financial statements.

For the annual report as of, and for the year ending, Dec. 31, 2018, we certify that to the best of our knowledge:

n This annual report does not contain any untrue statements of a material nature or omit to state a material fact necessary to make the statements not misleading with respect to the period covered by the annual statement;

n The financial information included in this annual report fairly presents in all material respects the financial condition, results of operations, and cash flows as of and for the periods presented in the annual report;

n An adequate system for disclosing controls and procedures exists to ensure that material information is made known to us by others within the organization;

n Management has concluded that the system of internal control over financial reporting was effective as of Dec. 31, 2018;

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

Richard F. Chambers, CIA, QIAL, CGAP, CCSA, CRMA President and Chief Executive Officer

Ann S. Cohen, CPA, CGMA Executive Vice President and Chief Financial Officer


I am an internal auditor.

40 | The Institute of Internal Auditors 2018 Annual Report 1035 Greenwood Blvd., Suite 401 / Lake Mary, FL 32746 USA / www.theiia.org / www.globaliia.org

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