Presentation on theme: "The Audit Committee and the Evolving role of the Internal Audit function Dr Claudelle von Eck."— Presentation transcript:
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.
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 IIAs 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 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 dont measure results, you cant tell success from failure If you cant see success, you cant reward it If you cant reward success, you are probably rewarding failure If you cant see success, you cant learn from it If you cant recognise failure, you cant 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 Managements response to findings and recommendations Internal audits 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 Tone at the top Managements response to findings and recommendations Internal audits 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 CAEs capacity IA Functions 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 Reviews King III Chapter 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 cant 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)