Internal auditors are shedding their number -crunching shells and taking wing as corporate-wide risk experts, recent trends seem to show. Building on their Sarbanes-Oxley (SOX) expertise in perfecting financial controls, auditors should—and many are beginning to—play critical roles in assessing enterprise-wide business and operational threats, according to a recent PricewaterhouseCoopers report. With SOX demands decreasing, notes Jim LaTorre, PWC internal audit services leader, “manpower is being freed up to tackle all risk issues that impact shareholder value.”

That’s presuming the environment is receptive, notes Michelle Scott, director of research and analysis at the Institute of Internal Auditors (IIA). “Our members are equipped and eager to contribute to risk assessment in all areas,” she says. “It’s more a question of whether management is open to the expanded role. You can tell executives all day about risks and what they should do about them, but it means nothing if those warnings are not heeded.”

A case in point: A former internal auditor raised red flags about American International Group’s derivatives valuations long before the insurer ran into trouble. Joseph St. Denis told a congressional panel in October that his early warnings about dangerous credit swap valuations were ignored by his boss, who, the auditor says, acknowledged “deliberately excluding” him from talks for fear he would “pollute the proceedings.” Now, AIG could face criminal fraud charges.

AXA Equitable, among others, had keener foresight. “It’s critically important to provide greater visibility by using strategic auditing methods in your organization,” AXA senior vice president and auditor Andrew Raftis told a recent gathering of chief audit executives sponsored by software maker ACL Services, PWC and MIS Training Institute. Toward this end, says Raftis, “we are evolving internal audit to provide better auditing of organizational risk.” And AXA’s strategic audit team is making sure the lines of communication are open between auditors, the chief executive and the audit committee.

If other financial services companies had applied similar auditing strategies, particularly to credit risk, some might have been able to stem the losses that ultimately destroyed them, suggests PWC’s LaTorre.

Moreover, if auditor evaluations extended to the supply chain and risks pertaining to safety, quality and reliability, the PWC whitepaper notes, lead-tainted products from China might have been prevented from hitting the market. Companies would also be well served if auditors participated in developing and monitoring processes to, say, detect and avoid discrimination lawsuits by customers, suppliers and employees, or to guarantee that pricing policies don’t smack of collusion.

"Management is looking at the wealth of corporate knowledge and experience to make sure that the financial meltdown and other crises won’t happen again,” says IIA’s Scott.

As adoption of international financial reporting standards moves to the fast track, finance executives appear conflicted, a recent U.S./European survey indicated. The majority of 749 international corporate finance professionals interviewed by Duke and Oxford universities favor a shift from generally accepted accounting practices (GAAP) to international financial reporting standards (IFRS). And yet 60 percent say the complexity and cost of switching standards may outweigh the benefits and 40 percent question whether truly global standards are achievable, given the different legal environments and business cultures across countries.

“There’s a lot at stake,” says Tim Buthe, an assistant professor at Duke. “Good standards can improve the efficient allocation of scarce financial resources, but, conversely, poor standards or standards that lend themselves to inconsistent implementation can seriously undermine public confidence in financial markets and thereby exacerbate financial crises and economic hardship.” Buthe and Oxford professor Walter Mattli talked to experts from the United States, Germany, France and the United Kingdom.

On Nov. 14, the Securities and Exchange Commission (SEC) issued its much anticipated proposed IFRS roadmap, defining milestones that could result in mandatory IFRS filing in fiscal years ending on or after Dec. 15, 2014, if not sooner. First, as a trial though, 110 companies or more could switch to the international rules as early as next year, selected by their size and their industry. The SEC predicts that these companies would each incur about $32 million in additional costs in the 10-Ks they file in 2010. The SEC seeks comments on its roadmap for mandatory adoption within 90 days after its publication in the Federal Register—or mid- to late-February.

The survey by Duke and Oxford also indicates that U.S. executives, more than their European counterparts, approve of key aspects of IFRS reporting, such as due process, transparency, accessibility, inclusiveness and accountability. Only 12 percent of U.S. respondents and 19 percent of European respondents view the trend toward “fair value accounting” favorably.

Most say early involvement in the standard-setting process is key, but while 93 percent of U.S. companies say writing comment letters with feedback is effective, only 51 percent of Europeans agree.

IBM’s InfoSphere Traceability Server now features business intelligence (BI) capabilities from Cognos 8 BI, including the ability to create dashboards and reports updated in real time, says Christian Clauss, IBM's director for sensor network solutions.

With Infosphere companies can track items in their supply chain using radio frequency identification (RFID) tags and bar codes. The update also includes a trading partner console that makes it easier for a company to add suppliers, says Clauss.

Matiq, the IT subsidiary of Norwegian food supplier Nortura, has been working with IBM to use InfoSphere’s RFID technology to track food supplies in that country. The new version allows authorities to make food recalls, like the recent recall of tomatoes in the U.S. following a salmonella scare, much narrower, says Matiq CEO Are Bergquist.

InfoSphere was chosen for its full compliance with the Electronic Product Code Information Sharing (EPCIS) standard, which allows trading partners to share information captured using sensor technologies, says Bergquist. The pharmaceutical, car parts and airplane parts industries already use this feature to prevent counterfeit items from entering their supply chains, says Clauss.

FXpress Corp. has upgraded its Web-based Software-as-a-Service (SaaS) treasury solution to support the new derivatives disclosure requirements of the Financial Accounting Standards Board (FASB). Financial Accounting Standard (FAS) 161 requires a company to disclose the nature, volume and effect of the derivatives on its balance sheet and earnings statements for fiscal periods that begin after November 2008.

FXpress’ FIRST F8 also adds support for straight-through processing (STP) of financial payments by allowing companies to settle their FX and commodity contracts via SWIFT messages to financial institutions, says Jason Halpern, product manager at FXpress.

Robert M. Hof, manager of treasury operations at auto parts maker Delphi Corp., says the company will use this feature to move its FX trading profits from its settlement account in Germany to its payment accounts in Michigan. Hof adds that Delphi uses FIRST in other currency transactions including swaps, forwards, spot transactions and options.

FIRST F8 also offers a rounded-out workflow for managing commodity exposures, enhanced management of revolving lines of credit, incremental parsing of bank statements and analysis of prior day and current day bank statements, says Halpern.