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Organizational Governance: Embracing Internal Audit's Role
Organizational Governance: Embracing Internal Audit's Role
Governance
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Presentation Objectives
• The meaning of good governance
• The IIA’s governance model
• Participants and players
• Specific Internal Auditing activities
• Steps for embracing Internal
Audit’s role
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What is Organizational
Governance?
Policies, processes, and structures
used by an organization to direct
and control its activities, to achieve
its objectives, and to protect the
interests of its diverse stakeholder
groups in a manner consistent with
appropriate ethical standards.
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In Other Words…
It (governance) is essentially a
function of leadership and
direction within an organisation;
appropriate risk management and
control over its activities; and the
manner in which meaningful
disclosure relating to its activities
is made to shareholders and other
stakeholders.
King II Report, 2002
South Africa
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Governance Ensures The
Organization:
− Complies with society’s legal & regulatory
rules
− Satisfies the generally accepted business
norms, ethical precepts, and social
expectations of society
− Provides overall benefit to society and
enhances interests of stakeholders
− Reports fully and truthfully to its owners,
regulators, other stakeholders, and general
public to ensure accountability for its
decisions, actions, conduct , and performance
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The IIA Corporate Governance Model
Effective
Governance
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Sound Governance
Requires Synergy!!!
–Boards of Directors
–Management
–External Auditors
–Internal Auditors
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Board Responsibilities
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Operating Management
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External Auditing
• Provides independent
assurance on the financial
statement preparation and
reporting activities in
accordance with applicable
regulations and accounting
principles
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Internal Auditing
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What is Internal
Auditing’s Role?
• Assessor
• Advisor
• Advocate
• Catalyst
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Standard 2130
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Internal Auditing
Governance Maturity Model
Consideration of best practices and adaptation to the
specific organization – focus on optimization of
governance practices and structure
Allocation of Audit
Less More
Structured Structured
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Specific Internal Auditing
Activities
• Consider assessing the following:
– Board Structure, Objectives, and
Dynamics
– Board Committee Functions
– The Board Policy Manual
– Processes for Maintaining Awareness of
Governance Requirements
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IA Activities (continued)
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IA Activities (continued)
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Other Considerations
• Internal Audit’s role in governance
may impair its independence and
should be evaluated and if
necessary communicated to
management and the board.
• If impaired internal audit should
not perform audits or assessments
related to this role.
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Other Considerations
(continued)
• Organizational strategies
usually not questioned by the
internal auditor may need to be
if observed to be inadequate,
conflicting or negatively
impacting the organization or
its stakeholders.
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Other Considerations
(continued)
• Internal auditing must assess
the “big picture” of
governance.
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Other Considerations
(continued)
• Governance is changing rapidly
and requires the internal
auditor to monitor these
changes and evaluate how they
impact the role of internal
auditing in the future.
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Other Considerations
(continued)
• Internal auditor skills and
competencies should be
evaluated before undertaking
audits in the governance area.
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Possible Next Steps
• Discuss options for expanding
internal auditing’s role with the
chairman of the board and/or
executive management.
• Discuss with other key
stakeholders.
• Develop a broad framework of the
governance structure in the
organization, identifying potential
areas of weakness or concern.
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Possible Next Steps
(continued)
• Develop a multi-year plan to
develop internal auditing’s
role.
• Perform a pilot audit in one of
the previously mentioned
activities.
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IIA Resources
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