www.theiia.org the global practice of internal auditing as business officers: what’s in it for...
TRANSCRIPT
www.theiia.org
The Global Practice of Internal Auditing
As Business Officers: what’s in it for you?
Brian G. Brown CIA, CMA, CFEDirector – Corporate Services, Agricore United (Winnipeg)Canadian Representative on IIA Global Board of Directors
and North American Board, Chair – Canadian Advocacy Task Force
www.theiia.org
Agenda
• What’s going on around the world?• What is this profession that everyone is
talking about?• What can internal auditing do for you?• What’s happening in the public sector?• What is the new Academic Relations
strategy?
www.theiia.org
It is a great time to be an internal auditor…
…globally and, particularly, in Canada!!
www.theiia.org
“Last June, Cooper told the audit committee of WorldCom's board that the company had been playing
dirty with its accounting practices.”Time Magazine
Internal Auditor named a
“Person of the Year”
www.theiia.org
Global Developments
• Founding member of COSO• Contributor to King Report in South Africa• Ongoing communication with SEC/PCAOB• IFAC & INTOSAI alliances• Memorandum of agreement with ACCA • Junior Achievement
www.theiia.org
Global Developments• IIA Australia is an active member of the Australian Stock
Exchange’s Corporate Governance Council.• IIA-Chinese Taiwan has been designated by the SEC as a
provider of governance education.• IIA-France was appointed by the French SEC to be the lead
writer of the French control framework.• IIA Philippines developed the SEC Circular for the Code of
Corporate Governance. The code, approved by the SEC, contains various provisions regarding the importance of internal auditing and the vital role of the CAE.
• IIA South Africa was a major coordinator and developer of the King Report on Corporate Governance.
• The IIA has also commented on exposure drafts from the Basel Committee and the OECD (Organization for Economic Cooperation and Development.)
www.theiia.org
Canadian Government –“Policy on Internal Audit”
October 2005 Entrenches Internal Audit into the Governance
Structure of the Government…
• Additional $30 million funding• 200 – 300 additional IA staff• Certification, professional development• Independent Audit Committees• Reporting relationships• Comptroller-General supervision
www.theiia.org
Quotes…
Internal audit is the primary resource of the audit committee in carrying out its duties and responsibilities. With those responsibilities increasing and continued pressure from the SEC for financial reporting integrity, a functioning partnership of the audit committee and internal audit is vital.
-BellSouth Corporation
www.theiia.org
Quotes…
An active and informed audit committee provides the ultimate independent and objective oversight of the corporate control environment, including focus on emerging trends and risks. Internal auditing is the primary agent of the audit committee within the company.
- Ford Motor Company
www.theiia.org
From the Media…
“Internal Auditors are no longer stuck in the financial compliance box, having…evolved into a more business-oriented role.”
“Few careers (sic) are more sought-after than internal auditors…”
“Internal auditors are rock stars now, this is
their day in the sun.”
www.theiia.org
The Institute of Internal Auditors (IIA)
Global Membership:1990 – 39,000
2001 – 74,000
April 2005 – 100,000
June 2006 – 123,000(160 countries)
www.theiia.org
The Institute of Internal Auditors (IIA)
Global Membership:1990 – 39,000
2001 – 74,000
April 2005 – 100,000
June 2006 – 123,000(160 countries)
Canadian Membership:
2003 – 3,800
April 2005 – 4,700
June 2006 – 5,400
www.theiia.org
IIA Membership - Educational Services
• 2300 Global Members (101 in Canada) – 80 countries
• 453 “Educators” (20 in Canada) – 20 countries
• 1033 “Student Members” (18 in Canada) – 7 countries
www.theiia.org
Certification Statistics (Global)
2001 – 35,732 Certified Internal Auditors (CIA)
March 2006 – 57,339 CIA’s
www.theiia.org
Job Situation
Internal Auditors are one of the most sought-after professions globally
Demand is currently far exceeding supply
Within Canada, particular challenges in Montreal, Ottawa, Toronto, and Calgary
– April/May 2006 Canadian statistics:
Monster.ca: 75 - 100 job opportunities weeklyWorkopolis: 170 – 200 job opportunities weekly
www.theiia.org
The IIA in CanadaMajor Change in Profile
Recent Announcement:
• Establish a Canadian Council (volunteer oversight body)
• Hire an Executive Director• Open an IIA Canada office
Target: July 2006
www.theiia.org
Advocacy in CanadaSignificant events in the last 18 months
• Canadian Federal Government Internal Audit initiative• Securities Commissions (OSC, AMF, BCSC) – meetings,
correspondence• The Directors College – IA on education program• Institute of Corporate Directors – National, Chapter
relationships• CICA Audit Committee Conference (September 2005)• Certified Management Accountants (CMA) projects • Certified General Accountants (CGA) discussions• Several chapters initiate coordination with local
universities• Speaker at CFO Summit (March 2006)• Meeting with Canadian leaders of ACCA, initiate chapter
relationships
www.theiia.org
Two current global programs under development:
1. Government initiative – improve support services for government auditors, quasi-government (World Bank, UN), and other public institutions
2. Academic Relations initiative – improve post-secondary education for students of internal auditing through direct relationships with universities around the world
www.theiia.org
What is this profession that everyone is talking
about?
www.theiia.org
What is Internal Auditing?Internal auditing is an independentindependent, , objectiveobjective assurance and consulting activity designed to add value and improveimprove an organization’s operationsoperations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk risk management, control, and governance management, control, and governance processesprocesses.
Adopted Jan/01
www.theiia.org
Basis for the Profession
• Standards for the Professional Practice of Internal Auditing
• Code of Ethics
• Certified Internal Auditor Designation
www.theiia.org
Internal Audit CharterSample:
• “Established…to improve corporate activities as a service to the organization and its shareholders”
• “To assist the Board and Management by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of control, risk management, and governance processes”
• Independent, objective assurance and consulting activity
www.theiia.org
Internal Audit CharterSample:
• Reporting relationships defined to provide independence and support
• Full, free, and unrestricted access• Recommendations to improve activities• Outline internal audit’s responsibilities• Management responsibilities (operations,
training, controls, policies, etc)• Compliance with IIA Standards• Signed by CEO, CFO, Audit Comm. Chair,
Chairman of the Board
www.theiia.org
Internal Audit Focus
• Internal audit is focused on internal controls that assist the whole organization in achieving its objectives;
• Controls that affect the quality and accuracy of the published financial statements usually represent only a small portion of the internal audit scope;
www.theiia.org
What can internal audit do for you?
www.theiia.org
Critical Success Factors(from a board/organization perspective)
1. Hire a top-notch Chief Auditor- Experienced (in internal audit), qualified,
competent, charisma, courage, management style, leadership, etc
2. Give Internal Audit something to do - Scope, budget, support, profile, a seat at the
table, listen to them
www.theiia.org
Internal Audit - Preferred Reporting Structure
C F O IT H R O p e ra tingD iv is io n s
C h ie f E xecu tiveO ffice r
In te rn a lA u d it
A u d itC o m m ittee
O th erC o m m itte es
B o ard o fD ire c to rs
Administratively to “most senior executive” (eg CEO)
Functionally to Audit Committee (2005 – 75%, 2002 – 55%)
www.theiia.org
Independence – structural guaranteed by reporting relationship with Audit Committee
• Organizational– Reporting relationship– Ability to “talk to the right people”– “Say what needs to be said” to the person
who needs to hear it– Access to senior management & board
• Functional– Not Responsible for audit area
www.theiia.org
Objectivity - frame of mindRelies upon the professionalism
of the internal auditor
• No bias• Not influenced by others• Open• “Say what needs to be said”• Perspective• Balance• Tone
www.theiia.org
Staffing internal audit….isn’t it just accounting?
CA
CGA
CMA
EngineerGeologist
BankerFinancial Analyst
Retail
CreditReal Estate
Computer Security Expert
Programmer
Operations
Lawyer
Human Resources
Risk Manager
Fraud Examiner
Trainer
www.theiia.org
What do Internal Auditors Do?
• Assess and provide assurance regarding the quality of internal controls, risk management, and governance processes
• Audits of a variety of form and style• Analyses, research, discussion• I.T. performance, security assessments• Reporting to managers/executives• Help improve the effectiveness and
efficiency of processes and operations• Investigate fraud situations• Provide a resource for skills (be careful)
www.theiia.org
Two clients…..different but overlapping services
Audit Committee
• Assurance regarding internal controls & risk management
• Identification of material issues
• Assistance with governance matters
www.theiia.org
Two clients…..different but overlapping services
Audit Committee
• Assurance regarding internal controls & risk management
• Identification of material issues
• Assistance with governance matters
Management
• Feedback on operations
• Recommendations to improve controls, processes, systems
• Participation in major projects
www.theiia.org
Why is Internal Audit able to effectively provide these services?
Skills and experience plus independent reporting structure, objective frame of mind….combined with in depth knowledge:
• business• organization• people• systems• control environment
With enough resources and scope, this combination is powerful!
www.theiia.org
Roles in current governance activities
• “Project audits”• Control Environment (tone at the top)• Ethics/fraud awareness• Information technology controls• Assist/review financial controls documentation• Advise on financial control testing (management’s)• Help the board/senior management understand new
regulations/guidance in the context of your organization
• Help the audit committee understand and fulfill its role
And….
• Maintain a balanced scope of audits
www.theiia.org
Assessing your internal audit services
• Competence/qualifications of Chief Auditor• Scope of work, resources available ($$, people, skills)• Knowledge – organization, industry, issues, etc• Identification of significant issues • Respect within the organization• Healthy tension with senior management• Healthy tension with external auditor• Reliable assurance - minimal surprises after audits• Quality Assessment reviews• Response to audit committee requests
Get to know your Internal Audit staff…….….they are your “eyes and ears”
www.theiia.org
What’s happening in the public sector?
www.theiia.org
Canadian Government“Rivals the most innovative
public-sector practices worldwide”
New Audit Policy Entrenches Internal Audit into the Governance Structure of the Government…
• Additional $30 million funding• 200 – 300 additional IA staff• Creation of Chief Audit Executive in each dept/agency• Independent reporting relationships• Certification, IIA Standards• Ongoing professional development• Best-practice audit methodologies• Independent Audit Committees• Comptroller-General supervision
www.theiia.org
New/Expanded services for government auditors
• Annual government auditors conference• Focused training at lower cost in more
convenient locations• Government audit resources available• Quarterly newsletter• Development of position papers• Increased role for government auditors in IIA
leadership, including financial assistance if required
• Advocacy efforts
www.theiia.org
What is the new Academic Relations strategy?
www.theiia.org
Current Situation
No Canadian university offers an “Internal Audit” education program
- generally, brief coverage under “other forms of audit”
Primary and Secondary School programs contain no introduction to internal auditing
Demand for internal auditors is growing (including university graduates)
www.theiia.org
Current SituationOutside Canada
• Currently 30 schools participating in “Internal Audit Education Partnership” program (USA, South Africa, England, France, etc)
• Examples: LSU – 150 grads/year, U of Pretoria (SA) – 100 grads/year
• Employers looking for more
www.theiia.org
Academic Relations StrategyRolling out in 2006
“Internal Audit Education Partnership” (Global)• Three levels of participation• Curriculum built around CIA CBOK• IIA to supply education resources• Coordination of symposia, summits, colloquia
by the IIA• Funding support• Quality Assurance
www.theiia.org
Academic Relations Strategy
To Participate:• Hire an Internal Audit educator• Hire grad/teaching assistants• Promote Internal Audit program• Create new education material• Enhance student involvement in IIA
chapters/affiliates
www.theiia.org
IAEP Benefits
For Schools:• Meet growing demand• Eminence opportunity• Research opportunities• Sponsorship• Flexible Internal Audit Curriculum
www.theiia.org
IAEP Benefits
For Students:• Employment opportunities• Internship opportunities• Research opportunities• Quality education in topical area
www.theiia.org
Final Thoughts….
www.theiia.org
Four Pillars of Good Governance
• Board of Directors• Senior Management• External Auditors• Internal Auditors
Each independent, knowledgeable, competent, trustworthy, forthright;
Strong interaction (teamwork, communication) between each;
Common objectives.
www.theiia.org
Questions?
Comments?