“how can audit committees ensure that they derive value from their internal audit function”

“How can audit committees ensure that they derive value from their internal audit function”.

Introduction

5th Annual Audit Committee Conference

Audit Committees and Internal Audit face various challenges in today’s world ► It matters how

we respond to these challenges

► Are the priorities between the AC and the CAE in sync?

For the AC to derive value from IA:

• Internal Audit Leadership – CAE

• Internal Audit Mission and Mandate

• Audit Committee relationship with the CAE

• Measuring IA Performance

• CAE expectations of the AC


IA Leadership - CAE

Internal Audit Leadership- CAE

► Appointment and dismissal► Reporting line and independence► Attributes the CAE must possess

• Dynamic communication skills / effective communicator• Business acumen• Excellent grasp of business risks• Gift for developing talent• Unflinching integrity and ethics• Strategic thinker

Develop the CAE profile before recruitment


► “The successful CAE is somebody with real business acumen and operational experience. You need to know what it’s like to run a business and make all the decisions and operational trade-offs leaders make every day.”-Brian Worrell, CAE General Electric

Internal Audit Leadership- CAE

Emphasis on communication skills• Successful CAE’s

• Customise communications• Deliver clear, concise and insightful messages• Are frank, transparent and comfortable

• Communication fosters stronger relationships with • Audit Committee• Executive Management• Other stakeholders“Boards want someone who is a good communicator and won’t sugarcoat or pull punches on important issues. It’s important that our messages are delivered clearly, whether written or oral, so people can understand the magnitude of an issue; is it a rock or a pebble?”Paul

Sobel, CAEMirant Corporation


Communication challenges• Reports are too voluminous or not

well-written• Too many reports or too much

content• Limited/inadequate formal

communication• Ineffective delivery of presentations• No synthesis of internal audit

results• Management perception of CAE and

IA


What does this research tell you?

Moving toward Trusted Advisor status involves personal and collective growth into many of the ‘soft spots’ identified in the research

IA Mission and Mandate

IA Mission and Mandate

• Review the IA Function’s Mission and Mandate

• Understand the role of IA

• Difference between IA and external audit

• Combined assurance

• Balance between Assurance and Consulting

• Tone at the top

• Unlimited access to information and employees


Audit Committee relationship with the CAE

Audit committee relationship with the CAE

• Visible support• Facilitate adequacy of IA resources• Regular meetings with the AC Chair• Closed meetings with CAE• Appointment and dismissal of the CAE• Performance evaluation of the CAE• Repeat audit findings kpi’s in management’s scorecards• AC and CAE – Are they in sync? If not how do we bridge the gap?


Measuring IA Performance

Consider the following in evaluating IA Performance

• Is Internal Audit a trusted advisor

• Is the CAE respected by management

• Partnership vs policing audit approach

• IA recommendations – are they implemented

• IA knowledge of the business

• Follow-up audits and Repeat findings

• Is the Internal audit plan aligned to business objectives

“It is essential to have a great understanding of the business. If you don’t, your job can be pretty hard. You need systemic thinking, the ability to connect the dots and understand the implications and consequences of business decisions in order to utilize resources in the most effective way.”Connie McDaniel, CAEThe Coca-Cola Company


Consider the following in evaluating the IA

• Does the CAE provide value adding advise• Are IA recommendations implemented• Is IA taken seriously• Does Management approach IA for input and advice


Being ‘audited’ for many people can be perceived as an uncomfortable experience.

Is the CAE a strategic partner?

Partnership or Policing audit approach


How is IA perceived?

Focus on the AC

CAE expectations of the AC

• Reasonable understanding of the business• Invest sufficient time in reading and understanding IA

reports• Offer ongoing visible support to the CAE • Composition of the committee• Independence of the committee• Understand the role of IA• AC annual evaluation•


Conclusion

• Are you deriving value from your IA function?• Does your IA function only exist for compliance purposes? • Are you visibly supporting the IA function?•


► Q & A

“how can audit committees ensure that they derive value from their internal audit function”

Documents