5 Internal audit uniquely positioned to be a trusted advisor to the leadership in the organisation
6 Lack of understanding of the role of internal audit
7 VALUE PROPOSITION OF INTERNAL AUDITING FOR KEY STAKEHOLDERS 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.
8 Key factors for Internal Audit to add value ObjectivityIndependenceCompliance with the IIA’s Code of EthicsProviding independent objective assurance and consultingCompliance with the International Standards for the Professional Practice of Internal Auditing
9 Lack of support from leadership Findings not taken seriouslyRecommendations not implementedToo many instances where Audit Committees are not displaying enough strengthDeath threats where internal auditors blow the whistle
10 Audit Committee Oversight Public interest?Audit Committee OversightAsk the right questionsAsk the tough questions
11 Value of oversightAccountability – Complex systems vs primitive natureWhat gets measured gets done
12 What gets measured get done If you don’t measure results, you can’t tell success from failureIf you can’t see success, you can’t reward itIf you can’t reward success, you are probably rewarding failureIf you can’t see success, you can’t learn from itIf you can’t recognise failure, you can’t correct itIf you can demonstrate results, you can win public support”(Osborne L. Gaebler, 1992)
13 Changing focus of internal audit 2010Operational auditsAuditing financial risksEvaluating effectiveness of control systemsNext five yearsExecutive compensation assessmentsQuality/ISO auditsBusiness viability assessmentsInvestigations of fraud and irregularitiesSocial and sustainability auditsAudits of compliance with regulatory code requirementsDue diligence reviews for corporate acquisitions/mergers etc
14 In camera meetings Tone at the top Management’s response to findings and recommendationsInternal 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 whyIn camera meetings
15 One-on-one between the Audit Committee Chair and the CAE Strategy to protect internal auditOne-on-one between the Audit Committee Chair and the CAE
17 Questions to ask the CAE CAE’s capacityIA Function’s capacityAdherence to Standards and IIA SA Career path standards?Budget adequate?
18 Questions to ask CAE Is the audit plan risk based? Is the audit plan balanced with enough focus on strategic risksDoes the audit plan have adequate focus on matters such as ethics, governance, assessing the risks related to reputation, customer service and environmental factorsSeniority and reporting lines?Follow-ups being done?
19 Quality Assurance Reviews King III Chapter 3 : 3.7.3The audit committee should ensure that the internal audit function is subject to an independent quality review as and when the committee determines it appropriate
20 Why are Quality Reviews important? For the evolution of the Internal Audit ActivityReview of the current activity – Assess current internal audit structure, methodologies and resourcesConformance with the IIA StandardsBenchmarking with Best PracticeIdentify opportunities to improve internal audit capabilities and processesClarify and validate management and shareholder expectations of the departmentDevelop actionable strategic plans to align internal audit with corporate goals
21 Governance is a Leadership issue Let history judge us kindly
22 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)