1. The Audit Committee and the Evolving role of the Internal Audit function
Dr Claudelle von Eck

2. The IIA is the creator and custodian of the international Standards for the Professional Practice of Internal Auditing.
The Standards

3. Provides Moral Compass through the Code of Ethics

4. Navigating through a volatile environment

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
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

9. 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

10. Audit Committee Oversight
Public interest?
Audit Committee Oversight
Ask the right questions
Ask the tough questions

11. Value of oversight
Accountability – Complex systems vs primitive nature
What gets measured gets done

12. 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)

13. 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
Social and sustainability audits
Audits of compliance with regulatory code requirements
Due diligence reviews for corporate acquisitions/mergers etc

14. 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
In camera meetings

15. One-on-one between the Audit Committee Chair and the CAE
Strategy to protect internal audit
One-on-one between the Audit Committee Chair and the CAE

16. Combined Assurance
Internal Audit coordinates

17. Questions to ask the CAE
CAE’s capacity
IA Function’s capacity
Adherence 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 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?

19. Quality Assurance Reviews
King 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

20. 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

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)

23. Thank you!