1. Banco Interamericano de Desarrollo www.iadb.org The development of the Internal Auditing function to combat fraud and corruption Martin Guozden CP, CPA, CIA, CISA, CCSA Office of the Auditor General

2. Banco Interamericano de Desarrollo www.iadb.org Agenda IDB Group Systemic Framework against Corruption Successful Internal Auditing Function Regional Forums 2

3. Banco Interamericano de Desarrollo www.iadb.org Systemic Framework against Corruption Personnel Internal Policies Procurement Policies Bank’s General policies and guidelines 3

4. Banco Interamericano de Desarrollo www.iadb.org Specific Bank’s Strategies Code of Ethics (2006) Policies for the Procurement of Goods and Works Financed by the Bank (2006) Policies for the Selection and Contracting of Consultants Financed by the Bank (2006) Modernization of the State Strategy (2003) 4

5. Banco Interamericano de Desarrollo www.iadb.org Key Developments Affecting Internal Audit Key Professional Practices Framework Internal Audit Expectations Components of a Successful Internal Audit Strategy 5

6. Banco Interamericano de Desarrollo www.iadb.org Professional Practices Framework Definition of Internal Auditing Code of Ethics Standards for the Professional Practice of Internal Auditing – Attributes – Performance – Implementation Guidance – Practice Aids – Evolving Issues 6

7. Banco Interamericano de Desarrollo www.iadb.org System Components Interrelations 7 Control EnviromentRisk EvaluationControl ActivitiesInformation and CommunicationMonitoring Unit A Unit B Activity 1 Activity 2 Operational Financial Information Compliance Operational Objectives Components Per COSO Internal Control - Integrated Framework

8. Banco Interamericano de Desarrollo www.iadb.org Internal Control Process 8 Per COSO Guidance for Smaller Public Companies

9. Banco Interamericano de Desarrollo www.iadb.org Internal Audit Expectations –Aligning Internal Audit Objectives with Business Objectives –Demonstrating and Adding More Value –Internal Audit Becoming a Key Player in the Risk Management Process –Educating Management –Increasing Use of Technology –Increasing Use of Knowledge –Using “Non-Traditional” Internal Auditors 9

10. Banco Interamericano de Desarrollo www.iadb.org Necessary Investments for a Successful Internal Audit Human Resources Technology Knowledge Methodology Communications 10

11. Banco Interamericano de Desarrollo www.iadb.org The Evolution of Internal Audit Compliance Auditing Internal Control Process Reviews Operational Process Reviews Strategic Business Partner Current State Desired State  11

12. Banco Interamericano de Desarrollo www.iadb.org Strategic Partnering Based Auditing Internal Audit work should be based on: working with management – develop a thorough, shared understanding of the business and various business risks determine the Business Risk Management Process (BRMP) that should be in place to effectively manage the key risks audit for design, operational effectiveness and compliance within each BRMP component 12

13. Banco Interamericano de Desarrollo www.iadb.org Internal Audit Challenges and Barriers People Methodology Knowledge Technology Communications u Provide More Value u More Comprehensive Risk Coverage u Operate More Efficiently Significant Investments Often Needed Internal Audit’s Challenges Future Successful Internal Audit Function Common Barriers 13 u Aligned with organization’s business objectives u Acts as corporate change agent u Risk model focus is on enterprise risk u Investments enable Internal Audit to keep pace with changing business environment u Internal auditors are better prepared for future leadership roles

14. Banco Interamericano de Desarrollo www.iadb.org Regional Forums-Objectives 14 “Logical Framework workshop” to develop a plan of action that serves as a foundation for future actions of the Bank in strengthing the control and internal auditing “Forum on Internal Auditing” to share knowledge and information regarding the internal audit’s role, along with a presentation of the plan of action; as a result of the logic frame workshop.

15. Banco Interamericano de Desarrollo www.iadb.org Regional Forums - Participants 15 Logical Framework Workshop Public Institutions – Technicians Special Guest Donor's community IIA, OLACEF, CAROSAI Forum on Internal Auditing Logical Framework workshop participants Public Institutions – Authorities

16. Banco Interamericano de Desarrollo www.iadb.org Regional Forums-Expectations 16 Pilot Porject in Central America Finnancing obtained for a new project Analysis from obtianed results Expand to the rest of the Region

17. Banco Interamericano de Desarrollo www.iadb.org Questions