Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance

Best Practices for Corporate Governance & Board Effectiveness 31 August -1 September 2009 swissôtel Nai Lert Park Bangkok By Pairat Srivilairit, CIA, CISA, CBA, CCSA, CFSA, CISSP, CFE Tuesday, 1 September 2009, 13.15 –14.15 hrs 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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About Speaker

    Mr Pairat Srivilairit received a bachelor of engineering from Chulalongkorn University and a MBA from Thammasat University. He is a certified internal auditor (CIA), certified information systems auditor (CISA), certified bank auditor (CBA), holder of certification in control self-assessment (CCSA), certified financial service auditor (CFSA), certified information systems security professional (CISSP), and a certified fraud examiner (CFE).

He is chairman of the Bank and Financial Institution Internal Auditors Club (BFIA) and past director of ISACA Bangkok chapter. He is also a member of The Institute of Internal Auditors (IIA), The Association of Certified Fraud Examiners (ACFE), The Information Systems Audit and Control Association (ISACA), The International Information Systems Security Certification Consortium (ISC)² and The Institute of Internal Auditors of Thailand (IIAT).

He is a known lecturer on operational auditing and information system auditing courses at IIAT and ISACA Bangkok Chapter. He is also a special lecturer of the IIA’s Internal Auditing Education Partnership Program (IAEP) at Chulalongkorn University, and served as a member of the IIAT’s editors committee in publishing the Thai version of IIA standards, and the book on internal auditing procedure which was published with the support from the Stock Exchange of Thailand (SET). He also represented IIAT speaking to students at several universities to disseminate the internal auditing profession.

Mr Pairat Srivilairit is associated with finance and banking industry for over 18 years with rich experiences in the area of management consulting, planning, research, investment, operation and audit. He is now with TISCO Bank Public Company Limited as head of internal audit and secretary to the audit committee.

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Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Outline Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate

Governance:

      (60 min) Latest development on Audit Committee mandates Critical roles & responsibilities at the present Recommended tools & mechanism for Committee to effectively discharge their roles and responsibilities Exploring how IA can excellently work with Committee Effectiveness & efficiency of Internal Audit functions Summary 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Board’s Roles in Governance

 “Governance is the system by which organizations are directed and controlled. It includes the rules and procedures for making decisions on corporate affairs to ensure success while maintaining the right balance with the stakeholders’ interest.”  Board’s Dual Roles in corporate governance – – Advisor to management Fiduciary to shareholders 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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The Bad News

 Capital markets expect more from Audit Committee oversight role in every areas that demand transparency.

– – – – – Oversee process that produces reliable, transparent and objective financial information Ensure the company has effective internal controls Retain and compensate external auditors Oversee risk management Compliance with laws and regulations affecting the company – Oversight of management .

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Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Financial Accuracy

      Understand financial statements / accounting policies Assess quality of earnings , not just reliability Healthy skepticism / ask probing questions Comfortable with treatment of unusual / complex issues Understand significant changes / auditors’ concerns Consider risk of fraud ― it is never zero  Revenue recognition  Expense classification  Accounting for business combinations  Provisions  Areas of judgement  Suspense / Clearing accounts  Review adequacy and consistency of disclosures 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Internal Control

    Assess if management provide enough tone at the top Ensure staff have capabilities Strong culture of integrity “do the right thing” Understand if audit plans address high-risk areas • Management override • Outside service providers • Information technology • Mergers and acquisitions  Poor culture  Recurring control weaknesses  Payment systems  Segregation of duties  Understand control weaknesses , correction plan, and their impacts on financial reporting 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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External Auditor

  Auditors should report directly to the committee Audit Committees have a role in – – – Selecting , or reappointing, external auditors Evaluating auditors’ performance Ensuring auditors’ independence   Candid and ongoing communications are vital Timely and robust dialogue on complex issues is essential 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Risk Management

  Understand how processes are tailored to meet company’s specific needs Ensure processes are ongoing , with appropriate staffing  Meet periodically with Chief Risk Officer 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Compliance and Ethics

       Review and approve code of conduct Ensure staff receive and understand the code Management exhibits ethical behavior Understand program for monitoring code compliance Review reported violations and follow-up actions Whistleblower / complaint hotlines Review reported complaints / ensure actions taken are timely, consistent, and appropriate 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Oversight of Management

      Noses In. Fingers Out.

Communicate openly / challenge as appropriate Balance advising with fiduciary duty role Strong, open two-way communications Management should seek committee’s input of key decisions in advance Evaluate management’s performance strength and assess bench 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Life Challenges

 How the Audit Committee meets increasing accountability and regulatory and statutory mandates – Have clear vision of what should be doing – Have the right directors on the Committee – Have effective structure to let them do work – Have a committee mandate - not a one time activity – Receive pertinent information and timely briefings – Have access to right people at the right time – Ensure time is well spent and activities are focused – Ensure the Committee’s voice to be heard 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Members’ Attributes

     Good understanding of the business—including company’s products, services, and industry Willingness to dedicate substantial time and energy Other relevant attributes – Extremely high level of integrity – Healthy skepticism and courage to challenge – Inquisitiveness and independent judgment Good financial knowledge Regular training / orientation 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Meeting-Planning Tips

 Strategies to cope with expanded workload and ensure good steering of agenda.

– Use a schedule planner over the year – Balance workload across meetings – – Meet in person at least submitted at least 4 times a year 10 days in advance , 2-4 hrs each Detailed, written agenda and briefing materials – – Expect chairperson to facilitate discussion, encourage meaningful participation, hold pre-meetings to explore issues, and ensure the right people attend Ensure accurate minutes meeting discussions and capture follow-up actions for accountability are kept to summarize 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Participants

        Should allow frank discussion of confidential matters Both internal audit director and external auditors typically attend every meeting Management’s participation is important Ask CEO / CFO to be on call during the meeting Avoid schedule multiple board committee meetings concurrently Meet privately with IA director, external auditors, finance management, and others, as warranted Guard against too many observers May engage outside specialist as necessary 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Committee Evaluation

 Evaluate committee performance by comparing activities against regularly    • Charter • Board approved mandate • Regulatory requirements • Leading practices Assess committee dynamics , not only on what the committee does, but also on how effectively it functions Should be robust— no “check the box” Obtain feedback from board, management, internal audit, general counsel, and external auditors 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Use of Internal Audit

 Internal audit must have appropriate stature in the company, by – – – Dual reporting Ensuring IA’s relationship to AC and CEO continual access Committee play key role to committee in selection, evaluation, compensation, succession of IA director – – – – Review and approve Monitor plans IA charter and plans / approve major changes Understand audit results / focus on findings and follow-up action Ensure IA has budget and resources needed 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Increase IA’s Effectiveness

             Open communication with management and committee Ask stakeholders’ feedbacks Strategy Focus linked to objectives / stakeholder’s value more on risk / governance Systematically-prioritized and adaptable plan Reduce routine Automate and low value-added activities fraud detection / shorten reporting cycle Attract and retain top talents Third party expert / IT audit Adherence to auditing standards and ethics Strengthen business knowledge and computer skills Play risk and governance educator role Quality assurance review 30/04/63

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Summary

Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance:     New requirements for accountability present a unique opportunity for audit committee and internal auditors to add value to organization. Audit committees must understand internal audit’s role they are to work effectively and share a healthy interdependence .

if The internal auditors provide objective assessment the state of the organization’s risk, control, governance, and monitoring activities to the audit committee.

on Audit committees provide validation and oversight to the internal auditing activities.

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Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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Q&A

PAIRAT SRIVILAIRIT CIA, CISA, CBA, CCSA, CFSA, CISSP, CFE Internal Audit Department TISCO Bank Public Company Limited Mobile Office Email : +668 1903 1457 : +66 2633 7821 : [email protected]

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Accountability and Practices of Today’s Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]

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