General Audit & Tax Planning – Overview of the Technical Accounting & SEC Standards
Robert Auslander, Vice President, Internal Audit, Bausch & LombTrevor Auckerman, VP, Global Tax at Amneal Pharmaceuticals
Anna Simansky, VP, Global Audit Services at Zimmer Biomet
James Engle, Controller, Finance at Collegium Pharmaceuticals
Robert Auslander, Vice President of Internal Audit at Bausch & Lomb, led a panel discussion on new internal audit standards, and their implementation at the Life Sciences Accounting & Reporting Congress in March 2024 in Philadelphia. The panel included Trevor Ackerman, Vice President of Global Tax at Amneal Pharmaceuticals; Anna Simansky, Vice President of Global Audit Services at Zimmer Biomet; and James Engel, Finance Controller at Collegium Pharmaceuticals.
Internal Audit Standards
New internal audit standards have been released, and companies have until January 2025 to assess and implement these standards. Simansky said that companies must ensure there are proper mandates and strategies in place, which should be communicated to the entire organization.
According to Simansky, there should be “a clear strategy and vision for the audit organization … as well as enhancing the collaboration of the assurance groups within the company internally and externally.” This is something Zimmer Biomet are still working on to effectively audit together and avoid duplicative efforts, she said.
Another key area is technology, which Simansky said is a heavy focus, adding that internal audit groups should have the appropriate technology to be able to achieve their mandates.
“The expectation is that we need to be able to leverage technology to not only drive efficiencies within our own processes, but really be able to leverage it more in terms of identifying opportunities,” she said. This involves continuous improvement and continuous monitoring while also auditing the technology itself.
The final change Simansky shared was “delivering more value.” There is a large focus on continuous improvement, and it’s important that organizations are measuring the performance of the internal audit function. Many groups are moving away from overall audit conclusions, she said, which is a requirement in the new standards.
Simansky discussed the steps the internal audit function needs to take to improve. She said companies need to communicate with the audit committee and inform them how the new standards could affect their organizations. GAP assessments were also proposed, which allows for a detailed review of where improvements may need to be made. Simansky said these improvements could be “within methodology, technology, and could require additional training for the team.”
Finally, she emphasised that audit teams need to be prepared for 2025—the broader organization should be aware of changes to internal audit standards and understand how it may affect them. Supporting this, Auslander said, “You should be demanding your internal audit department follow these standards and continuously improve, to not just improve the process efficiency and reduce costs.”
ESG standards
Engel proposed that the best way to implement environmental, social and governance (ESG) standards is to “think about it in parallel tracks between day one and then ongoing processes.” He suggested leveraging experience with the 842 accounting standards and use that as a roadmap when implementing ESG rather than reinventing the wheel.
Small-cap companies may have difficulty navigating these standards, he said. and will have to “leverage external support for some environmental expertise” such as carbon emissions, as they don’t have that skill set in house.
Johnson & Johnson and Pfizer are currently leading the way in implementing ESG standards, according to Engel, and he expects other pharmaceutical companies to follow suit soon. As a finance controller, Engel said it’s important to build controls and processes around disclosures and ensure there are vetted SOX controls along the way.
AI benefits and risks
While there are advantages of artificial intelligence (AI), such as efficiency and idea generation, there are associated risks. “The risk is in OpenAI, disclosing information in the public realm that could be considered privileged or private—you want to have controls around that,” Auslander said.
At Bausch & Lomb, a closed AI system is being developed for employees to use and restricting computer access to Open AI. He said the main problem is that AI is still an emerging technology, and “most companies are still developing the policies and procedures associated with that.”
Although some companies have policies in place against the use of AI, Simansky proposed setting up an AI engine that’s internal property so that companies can start leveraging it, with the knowledge that their data are protected. Audit departments should also be reviewing AI related policies and use, to protect their organization.
Ackerman seconded this, suggesting that “companies need to factor in ways to appraise people and warn them of what’s going on” regarding the use of AI.
