What’s Inside?

In 2008, most of the companies that encountered financial difficulties or filed for bankruptcy or had to be bailed out, had published unqualified audit opin-ions in respect of the 2007 financial year. A House of Lords Enquiry alleges that auditors were “disconcertingly complacent” about their role in the financial crisis. This raises certain points for discussion: x The implication of a financial failure immediately

after an audit x The meaning of a clean audit report

The Balance sheet as a snapshot of the state of affairs of a company

Asset values depend not only on fac-tors internal to the company but also factors external to the company

The role of probabilities in asset valu-ation

The expectation gap x To what extent should auditors be expected to

predict the future? Issues In Relation to the Internal Auditor - A survey of the companies receiving bailout funds revealed that a majority of the Chief Audit Executives felt that internal audit could have done more to assist their companies identify key risks.

The survey revealed that audit departments were impacted by the crisis and experienced significant budget cuts. Only 40% of companies surveyed in another study indicate that they have formal risk management systems. In many cases the recom-mendation of the internal auditor in relation to the establishment of risk management system or pro-cesses was ignored.

The Impact of a Financial Crisis on the Risk faced by Audited Entities After a crisis the relative weight of relevant risk fac-tors change significantly – it may also change during the course of the crisis. (Continues on page 5)

Audit’s Role During a Financial Collapse— Lessons Learnt (Excerpts) .... Page 1 & 5 CAACM Board of Directors, CAACM Vision & Mission .... Page 2 CAACM Membership—Benefits & Criteria .... Page 3 Examples of Governance Risks that must be Controlled for Good Governance …. Page 4 CAACM AGM & Conference 2013— Overview & Upcoming Events …. Page 6 CAACM AGM & Conference 2013—Photos, Trinidad & Tobago .... Page 7

NOVEMBER 2013.

Beyond Numbers

Official Newsletter of the Caribbean Association of Audit Committee Members Inc

Produced by: Caribbean Association of Audit Committee Members Inc P.O Box CP 5404 Castries Saint Lucia Tel: (758) 452 2877 Fax: (758) 452 2878 Website: www.caacm.com Email: caib@candw.lc

Audit’s Role During a Financial Collapse—Lessons Learnt (Excerpts)

Page 2

BOARD OF DIRECTORS - JULY 2013 - JULY 2014 Chairman: Mr. Austen Gittens Chief Internal Auditor , Antigua Commercial Bank ANTIGUA Vice Chairman: Mr. Nigel Fulgence Member, Audit Committee, 1st National Bank St Lucia Ltd SAINT LUCIA Secretary: Mrs. Mary Popo General Manager, CAB Secretariat SAINT LUCIA Director: Mrs. Melissa Simon Senior Manager - Internal Audit Department, East Caribbean Financial Holding Co. Ltd. SAINT LUCIA

Director: Mr. Marlon Higgins Group Manager– Finance & Branch Ops, Global Bank of Commerce ANTIGUA Director: Ms. Icilma Jeffers Internal Auditor, St. Christopher & Nevis Social Security Board, National Bank of Dominica Ltd DOMINICA Director: Mr. Anthony Galloway Assistant MD, Internal Audit Unit, St Kitts-Nevis-Anguilla National Bank Ltd. SAINT KITTS Director: Mr. Anthony St. Clair Chief Internal Auditor, First Citizens Bank Ltd TRINIDAD

FOUNDING MEMBERS

NATIONAL BANK OF ANGUILLA LTD

GLOBAL BANK OF COMMERCE LTD

NATIONAL BANK OF DOMINICA LTD

DOMINICA ELECTRICITY SERVICES LTD

CARIBBEAN MICROFINANCE (GRENADA) LTD

REPUBLIC BANK (GUYANA) LTD

THE BANK OF NEVIS LTD

1ST NATONAL BANK ST LUCIA LTD

EAST CARIBBEAN FINANCIAL HOLDINGS

COMPANY LTD

ST LUCIA ELECTRICITY SERVICES LTD

NATIONAL COMMERCIAL BANK (SVG) LTD

DE SURINAAMSCHE BANK NV (DSB)

HAKRINBANK NV

DFL DEVELOPMENT FINANCE LTD

FIRST CITIZENS BANK LTD

FIRST CITIZENS ASSET MANAGEMENT LTD

REPUBLIC BANK LTD

Official Newsletter of the Caribbean Association of Audit Committee Members Inc

CAACM VISION To be the recognized body in the Caribbean involved in developing the audit committee function. CAACM MISSION The ultimate objective for the establishment of CAACM is to improve the investment environment in the Caribbean region and increase investors' confidence in the integrity of financial reporting and investor information through the continuous development of the audit committee function by: i Providing educational programmes designed to improve the understanding of the roles and responsibilities of

audit committee members; i Developing codes of practices and templates for the proper functioning of audit committees; i Distributing information of interest to audit committee members on a timely basis; and i Providing a forum for audit committee members to exchange ideas and expertise on matters of common interest

including the resolution of policy issues related to the evolution of standards and practices.

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x Timely technical updates, and discounted rates on all deliverables x Training programs at 60% to 80% of the cost. The Association will use accredited lecturers and provide certificates upon completion of the respective course. x Conferences, conference calls and web-casts on best practices and technical developments in the reg-­ulatory environment x Resource centre with links to relevant websites x Newsletter on technical issues

x Access to an independent technical forum to ob-­tain advice on related issues and concerns x Access to a secure message board on which members can anomalously share information and ex-­periences, pose and answer questions, and otherwise discuss topics of interest. x Support through the Association’s membership base, affording the opportunity for discreet peer-to-peer discussion on issues facing members. x Support through the promotion of a professional and ethical culture in the functioning of audit commit-­tees throughout the region, as defined in the Code of Practice.

Official Newsletter of the Caribbean Association of Audit Committee Members Inc

KEY BENEFITS OF CAACM MEMBERSHIP

CAACM MEMBERSHIP CRITERIA

Membership is open to all ‘bodies corporate’ in the Caribbean/CARICOM region, which has a functioning au-­dit committee. The general membership fee is US$1500.00 per member. An additional US$500.00 is paya-­ble per wholly-owned subsidiary, applicable where the parent company is already a member. Application for membership should be made in writing to The Secretary, Caribbean Association of Audit Com-­mittee Members Inc (CAACM) at Chakiro Court, Vide Bouteille, P O Box CP 5404, Castries, Saint Lucia, and should be accompanied by: 1. Completed and signed Membership Application Form;; 2. Application fee of US$150.00;; 3. Certificate of Registration or Incorporation 4. Memorandum and Articles of Association or Charter, as applicable;; 5. Audited Financial Statements for the financial year immediately preceding the financial year in which the application is made. We look forward to receiving your application and to your membership of the CAACM!

WHY JOIN THE CAACM???

Becoming a member of CAACM, assures you the opportunity to partner with a select group of audit commit-­tee members who are committed to playing an integral role in improving the investment environment in the Caribbean region, as well as to increasing investor confidence in the integrity of financial report-­ing and investor information, through the continuous development of the audit committee member. Membership in CAACM demonstrates your organization’s recognition of the need to be proactive in following international best practices in Corporate Governance generally as well as the need to continuously revise monetary and compliance mechanisms. Since its inauguration, the Association has been hosting its Pre-conference Training & Conference annually, in June each year.

Page 4 Official Newsletter of the Caribbean Association of Audit Committee Members Inc

Examples of Governance Risks that must be controlled for Good Governance

1)Directors Breach of Fiduciary Duties

2)Lack of Director Proficiency & Care

3)Misdirection of Organization

4)Reckless Risk Taking

5)Uncontrolled Organization

6)Mis-procurement

7)Corruption & Bribery

8)Conflict of Interest

9)Group Think

10)Board Room Bullying

11)Financial Reporting & Disclosures

12)Corporate Fraud

13)Financial Distress

14)Poor Corporate Performance

15)Loss of License to operate

16)Business Interruption/ discontinuity

17)Impaired Auditors- lack of Independence, Objectivity, Professionalism & Integrity

18)Lack of Audit Proficiency & Care

19)False Assurance

20)Limitation of Audit Scope

21)Non Implementation of Audit Recommendations

22)Ineffective Corporate Social Responsibility

23)Corporate Non-Compliance & Unethical Conduct

24)Breach of Public Trust

Slide from presentation by Mrs. Claire Gomez Miller, Chief Audit Execu-tive, The National Gas Company, Trinidad and Tobago.

IT JARGON Excerpt from “Demystifying IT Audit Issues and Jargon for More Effective Reporting and Issues Resolution” Presentation

by Mr. David Hall, President IIA Jamaica

WORM

A self-replicating program that spreads from one computer to another, usually causing damage and compromising security in the process.

They are purposefully written by vandals to cause as much disruption as possible, or by hackers to compromise the security of a computer.

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Audit’s Role During a Financial Collapse-Lessons Learnt

(Excerpts) (Continued from page 1) The exposure of an entity to a financial crisis will depend on a range of factors including: x The industry in which the company operates x The entity’s financing or credit arrangements x The nature and quantity of financial instruments held by the entity

Procedures That Could Require Enhanced Emphasis in a Crisis (Auditing and Assurance Bulletin—Canada) x Continuance of Client Relationship x Communicating with those charged with governance x Going Concern Considerations x Planning the overall audit strategy x Understanding the entity and its environment, and assessing and

responding to the risk of serious misstatement x Auditing accounting estimates including fair value measurements

Lessons From The Crisis x The External Auditor always shares a significant portion of the

blame x The need for Auditors and Supervisors to make greater use of Ex-

ternal Experts x The enhanced regulations and standards pertaining to audits did

not prevent the crisis x The need for greater dialogue between Auditors and Regulators x The need to reduce the expectation gap in relation to audit reports x The need for more comprehensive reporting in relation to risk

What Audit Improvements would Help Reduce the Risk of Crisis x Audit Independence

Non audit services Mandatory Rotation

x Audit concentration Restrictive covenants Mandatory tendering for audit services

x Audit Committees The Audit Committee should report to shareholders on its

performance, the performance of the auditors, key areas of risk, and significant matters communicated to them by the auditors

x The sharing of information between regulators and auditors x IFRS

Mark to market, prudence, rules based x Going Concern

All or nothing approach x The usefulness of Audit Reports

New exposure draft x Expanding the role of the auditors

Internal controls, corporate governance, business model Conclusion x Auditors are not blameless in relation to their role in the Financial

Crisis but they were not the cause of the crisis x After the financial crisis, Auditors significantly increased their effort

(as well as the corresponding fees) with a view to mitigating audit risk

x There are many lessons to be learned from the crisis by auditors but also by a number of other key players

x Although audit risk cannot be eliminated entirely there is considera-ble scope for improvement in the conduct of audits

(Extract from presentation by Mr. Wendell E Lawrence, CEO, Caribbean Governance Consultants. For further information, contact at wlawrence@cgcinconline.com )

Official Newsletter of the Caribbean Association of Audit Committee Members Inc

CAACM BOARD OF DIRECTORS JULY 2013 - JULY 2014

“Hold yourself responsible for

a higher standard than

anybody expects of you.

Never excuse yourself.”

Henry Ward Beecher

CAACM Board of Directors (L-R):

Mrs. Melissa Simon (ECFH), Mr. Anthony St

Clair (First Citizens), Chairman: Mr. Austen

Gittens (Antigua Commercial Bank), Vice

Chairman: Mr. Nigel Fulgence (1st National

Bank), Ms. Icilma Jeffers (National Bank of

Dominica), Mr. Anthony Galloway (SKNANB),

Mr. Marlon Higgins (Global Bank of Com-

merce)

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CAACM AGM & Conference 2013 Overview and Upcoming Events

2013 AGM & CONFERENCE This year’s conference was held in Trinidad & Tobago, at the Hilton Hotel, on July 29th & 30th. There was an extreme-ly good turnout with over 110 delegates who hailed from a variety of organisations such as: Accounting Firms Credit Unions Banks—Commercial and Central Government and NGO’s Utilities Insurance Companies Manufacturing Industry Energy Sector The conference attracted audit professionals from all levels of the organisation with attendance by Directors, Senior Managers, Accountants, Senior Audit Analysts, Business Analysts, Audit Managers, Field Auditors, Compliance Officers, Audit Risk & Compliance professionals and Internal Audit professionals. The conference aimed to cover most of the major areas of concern for audit committee professionals and included thought-provoking presentations while enabling discussion on the following: Audit’s Role during a financial crisis/collapse. FATCA Compliance and Corporate Scandal ERM—Expectations and Capabilities of the Audit Com-

mittee Role Audit Management Systems Governance, Audit and Compliance Demystifying IT Audit Issues & Jargon for More Effec-

tive Reporting & Issues Resolution

Effective Internal Auditing, Internal Controls for good Corporate Governance

General feedback indicates that the conference achieved its objective of providing an informative and stimulating forum for audit committee professionals to learn and exchange thoughts, concerns and ideas towards improvement of their daily performance. It was felt by delegates that the network-ing was fruitful and the topics relevant and up to date. UPCOMING EVENTS……….

Audit Committee Training 8 CPE Credits

December 6, 2013

8:30 a.m. – 4:30p.m at the

Coco Palm Hotel Rodney Bay

Gros Islet, St Lucia

This course is for Audit Committee professionals. It increas-es awareness of governance issues and audit committee effectiveness. The workshop promotes audit committee and risk management best practices, and helps you complete a meaningful self - assessment of your organization’s govern-­ance process. TRAINING FEE:

Members: Individual participants - US$600.00 each 3 or more participants - US$550.00 each Non-Members: Individual participants - US$700.00 each 3 or more participants - US$650.00 each Fees are inclusive of all course material, lunch and coffee breaks

Official Newsletter of the Caribbean Association of Audit Committee Members Inc

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Photos from CAACM AGM & Conference 29th—30th July 2013, Trinidad & Tobago

Official Newsletter of the Caribbean Association of Audit Committee Members Inc