1 National Police Board 16 September 2009 Elisabeth Styf President ECIIA Chief Audit Executive for the Swedish Police Service 21 police authorities, the National Criminal Police (NCP), the Police Academy and The Swedish National Laboratory of Forensic Science Prior experience as CAE at listed companies and public entities IAS Conference 13 October 2009

2 National Police Board 16 September 2009 My view and experience of corporate governance on the EU level My view and experience of internal audit of the management control system IAS Conference 13 October 2009

3 National Police Board 16 September 2009 UK Cadbury 1992 USA- SOX The Winter-report EUs action plan - Individual country codes of corporate governance The European capital markets became more and more integrated 2006: The European Union was adopting a common approach covering: a few essential rules and ensuring adequate coordination of national corporate governance codes. But A step back

4 National Police Board 16 September 2009 Important steps for Internal Auditing up until now : Listed company to include in the annual report a descriptive statement covering the key elements of their corporate governance structure and practice ( Amendment of the 4th and 7th Company Directives (2006/46/EC) ) Audit committee of listed companies to monitor the effectiveness of the company's internal control, internal audit where applicable and risk management systems ( Amendment of the 8 th Company Directives (2006/43/EC) )

5 National Police Board 16 September 2009 EU directive ……. internal audit where applicable EU directive ……. internal audit where applicable What are the expectations of internal auditing from the regulators ? Many countries National Corporate Governance Codes in Europe do not include internal audit as mandatory

6 National Police Board 16 September 2009 To compare with ……. Sarbanes-Oxley Act Internal audit - Mandatory King III report – draft Internal audit - Mandatory

7 National Police Board 16 September 2009 Mandatory within certain sectors in Europe Internal Audit in Banks The Basel Committees Internal Audit Paper states that each bank should have a permanent internal audit function. Internal Audit in Insurance and Reinsurance Solvency II: System of Governance – Draft Insurance and reinsurance undertakings shall provide for an effective internal audit function. Public Sector Mostly mandatory

8 National Police Board 16 September 2009 Should Internal Auditing be mandatory on the European level ?

9 National Police Board 16 September National IIA Institutes In Europe ECIIA The Institute of Internal Auditors (IIA) ECIIA - European Confederation of Institutes of Internal Auditing – Limited resources –mainly based upon voluntary work

10 National Police Board 16 September 2009 The main objective for ECIIA is to promote the value of internal audit in Europe ECIIA To be the Internal Auditors National Institutes consolidated voice of internal auditing in Europe

11 National Police Board 16 September /02/ Why promote the value of Internal Audit Because I.A. should be one of the pillars in the corporate governance structure To establish a relationship with other organizations representing the pillars in corporate governance = The board of directors, senior management and external auditors internal auditing in ……position papers and in regulatory guidance

12 National Police Board 16 September 2009 Harmonizing European companies need to be able to do business across national borders within the EU Internal audit complies with international standards all over Europe Internal auditing is bringing value to the organizations

13 National Police Board 16 September 2009 We are working systematically with elaborated standards We are certified (CIA, … ) We have a quality assurance program We are the experts in corporate governance, risk management, internal control etc. We are not competing with risk managers, compliance officers, internal control officers etc. It should not be difficult to convince the Regulators and the Board that internal auditing is bringing value to organizations

14 National Police Board 16 September 2009 Board and A.C. The Management EU Parliament, European Commission External Audit Private/ Public The Company European Confederation of Directors Associations Ecoda.org European Issuers Fédération des Experts Comptables Européens FEE EUROSAI Organizations that ECIIA has established a relationship with

15 National Police Board 16 September 2009 How could internal auditors be involved in the management control system ?

16 National Police Board 16 September 2009 My experience as Chief Audit Executives Listed companies (financial institutes as well as not financial companies) Government authorities

17 National Police Board 16 September 2009 Regulations in Sweden regarding Internal auditing For listed companies that do not have a separate internal audit function, the board of directors is to evaluate the need for such a function annually and to justify its decision in its report on internal controls. For financial institutes - the board should ensure that there is a function that examines and evaluates the Internal control (including risk control and compliance function). In the companies that have an internal auditing function, internal audit should be that function. For a number of government authorities – must have an internal audit function The scope of the internal auditing should cover all of the organisations activities – the work is based on risk assessment.

18 National Police Board 16 September 2009 Regulation (2007:603) on the internal control in Sweden The government needs to ensure that its different entities fulfills its operational responsibilities and meet the requirements, regarding –operating efficient activities, –current law and other obligations arising from Sweden's membership in European Union –having a reliable and accurate accounting, and –with good management of government funds The internal audit should be based on an analysis of operational risks independent review of management's internal governance and control

19 National Police Board 16 September 2009 The Objectives for the Swedish Police To reduce the opportunities for committing crime To prosecute more crimes and increase the quality of crime investigations To execute other tasks than investigating crimes on the basis of public needs through prompt and correct handling, good service and a high level of availability

20 National Police Board 16 September 2009 Different entities within the Swedish Police that are audited The National Police Board 21 Local Police Authorities The Police Academy National Criminal Police The Swedish National Laboratory of Forensic Science

21 National Police Board 16 September 2009 Styrelse Government instructions Objectives and strategies Goals Control activities Risks Internal audit Internal audit of the management control system The Police Board Local police authorities The Police Academy National Criminal Police The Swedish National Laboratory of Forensic Science

22 National Police Board 16 September 2009 Main objectives Strategies 3 Main processes Process goals Key controls Total Riskaptite Sub process I Local goals Sub- process II Sub- process III Appropriate risk level ? To ensure it works Increase / decrease Local goals Local goals The strategy and the plans of the Swedish police Yearly Governmental instructions Temporary instructions from politicians Laws and regulations

23 National Police Board 16 September 2009 External Auditors' Risk assessment and Planned Activities The different entities Risk Assessment Governmental instructions Audit Plan/ Audit Work Proposal Regulatory/Legal Requirements Final audit plans InputOutput Board Approval Audit planning process Internal audit Risk Assessment

24 National Police Board 16 September 2009 Is the COSO framework an effective tool to ensure that the management control system works?

25 National Police Board 16 September 2009 Does the management control system work within all entities ? Risk management process Information and communication Control environment Control activities The management and the board has to ensure that everything works as it should Documentation Internal audit of the management control system

26 National Police Board 16 September 2009 Internal Environment Is there a formalized and communicated set of ethical values Are the right people, skills, tools and resources in place to achieve the objectives of the entity/ business unit / process? Internal audit of the management control system

27 National Police Board 16 September 2009 Risk Identification Risk Valuation Avoidance, Reduction, Sharing and Acceptance Has management assessed the costs versus the benefits of potential risk responses? Does management utilize reliable techniques to identify the risks? Internal audit of the management control system

28 National Police Board 16 September 2009 Does management consider how risk responses and control activities interrelate when designing control activities? Control activities Internal as well as external information Information and Communication Internal audit of the management control system

29 National Police Board 16 September 2009 Is there a process of ongoing monitoring in place for enterprise risk management mechanism within normal operating activities? Is there a periodically evaluation of the effectiveness of your enterprise risk management procedures? Monitoring and documentation Internal audit of the management control system

30 National Police Board 16 September 2009 High Risk areas Internal audit plan Risk analysis Audit recommendations' Planned control activities Internal audit's visit New routines Lower risk The police authority Internal audit of the management control system

31 National Police Board 16 September 2009 Should Internal Auditing be mandatory on the European level ? Is the COSO framework an effective tool to ensure that the management control system works? Thank you