The Audit Committee and the Evolving role of the Internal Audit function Dr Claudelle von Eck.
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Transcript of The Audit Committee and the Evolving role of the Internal Audit function Dr Claudelle von Eck.
The Audit Committee and the Evolving role of the Internal Audit function
Dr Claudelle von Eck
The IIA is the creator and custodian of the international Standards for the Professional Practice of Internal Auditing.
The Standards
Provides Moral Compass through the Code of Ethics
Navigating through a volatile environment
Internal audit uniquely positioned to be a trusted advisor to the leadership in the organisation
Lack of understanding of the role of internal audit
Governing bodies and senior management rely on Internal Auditing for objective assurance and insight on the
effectiveness and efficiency of governance, risk management and internal control processes.
VALUE PROPOSITION OF INTERNAL AUDITING FOR KEY STAKEHOLDERS
• Objectivity• Independence• Compliance with the IIA’s Code of Ethics• Providing independent objective assurance
and consulting• Compliance with the International Standards
for the Professional Practice of Internal Auditing
Key factors for Internal Audit to add value
•Lack of support from leadership•Findings not taken seriously•Recommendations not implemented•Too many instances where Audit Committees are not displaying enough strength
Death threats where internal auditors blow the whistle
Audit Committee Oversight
Ask the right questions
Ask the tough questions
Public interest?
Value of oversight
• Accountability – Complex systems vs primitive nature
• What gets measured gets done
What gets measured get done
If you don’t measure results, you can’t tell success from failure
If you can’t see success, you can’t reward it
If you can’t reward success, you are probably rewarding failure
If you can’t see success, you can’t learn from it
If you can’t recognise failure, you can’t correct it
If you can demonstrate results, you can win public support”
(Osborne L. Gaebler, 1992)
Changing focus of internal audit
2010
Operational audits
Auditing financial risks
Evaluating effectiveness of control systems
Next five years
Executive compensation assessments
Quality/ISO audits
Business viability assessments
Investigations of fraud and irregularities
Audits of compliance with regulatory code requirements
Social and sustainability audits
Due diligence reviews for corporate acquisitions/mergers etc
In camera meetings
Tone at the top
Management’s response to findings and recommendations
Internal audit’s independence (70% of internal auditors report intimidation/coercion to sweep
finding under the carpet – Where were the Audit Committees?)
Interpret what is not said in the audit reports and ask why
One-on-one between the Audit Committee Chair and the CAE
Strategy to protect internal audit
Combined Assurance
Internal Audit coordinates
Questions to ask the CAE
• CAE’s capacity
• IA Function’s capacity
• Adherence to Standards and IIA SA Career path standards?
• Budget adequate?
Questions to ask CAE• Is the audit plan risk based?
• Is the audit plan balanced with enough focus on strategic risks
• Does the audit plan have adequate focus on matters such as ethics, governance, assessing the risks related to reputation, customer service and environmental factors
• Seniority and reporting lines?
• Follow-ups being done?
Quality Assurance ReviewsKing III Chapter 3 : 3.7.3
The audit committee should ensure that the internal audit function is subject to an independent quality review as and when the committee determines it appropriate
Why are Quality Reviews important?
For the evolution of the Internal Audit Activity • Review of the current activity – Assess current internal
audit structure, methodologies and resources • Conformance with the IIA Standards• Benchmarking with Best Practice• Identify opportunities to improve internal audit
capabilities and processes• Clarify and validate management and shareholder
expectations of the department• Develop actionable strategic plans to align internal
audit with corporate goals
Governance is a Leadership issue
Let history judge us kindly
President Jacob Zuma‘ It can’t be business as usual’“We will not be able to blame apartheid if some villages still have no water, no electricity and no roads. We will not be able to blame anyone else if children still study under trees, if hospitals are falling apart, and if there are still thousands who live in abject poverty” (extract from Mail and Guardian –23 April 2010)
Thank [email protected]