Transcript The Auditor’s Role in Governance: Emulate, Evaluate, Educate Lori Cox, CIA, CGAP IIA Tucson Chapter President Director – Internal Audit, Pima Community College.

The Auditor’s Role in
Governance:
Emulate, Evaluate, Educate
Lori Cox, CIA, CGAP
IIA Tucson Chapter President
Director – Internal Audit, Pima Community College
The Auditor’s Role in Governance
Agenda
• Governance Defined
• Governance Activities
• Common Governance Components
• Related Standards
• Auditor Roles Defined
• Navigating Roles
• Challenges in the Auditor’s Role
• Navigating Politics
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What is Governance?
Provide an example of
Governance.
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Governance Defined
The whole set of legal, cultural, and
institutional arrangements that determine what
organizations can do, who controls them, how
that control is exercised, and how the risks and
returns from the activities they undertake are
allocated.
Margaret Blair, 1995
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Governance Defined
Governance involves a set of relationships between
an organisation’s management, its board, its
stakeholders and other stakeholders. Governance
also provides the structure through which the
objectives of the company are set, and the means of
attaining those objectives and monitoring
performance are determined.
The Organisation for Economic Co-operation and Development (OECD)
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Governance Defined
A set of processes, controls, and structures generally
performed within the organization by, or on behalf
of, stakeholders (including the board or other body
directly appointed by stakeholders – for example, a
community oversight board) to ensure that that their
interest are protected and their goals are achieved.
The objective of organizational governance is to
ensure that management is acting appropriately and
consistently within the interest of stakeholders.
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Norman Marks, IA Professional, Author, Blogger
Governance Defined
Governance can be defined as the mixture of
processes, procedures and structures
implemented by management and the board to
inform, direct, manage, and monitor
organizational activities.
The Institute of Internal Auditors
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Governance Defined
Effective governance includes systems and
associated processes and controls that
promote: ethics and values; performance and
accountability; risk communication; and
coordination and communication among the
board, external and internal auditors, and
management.
IIA Research Foundation
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Governance Purpose
The purpose of organizational governance is
to facilitate effective and prudent management
that can deliver long-term success to the
organization.
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Governance Activities
Governance activities exist to help the
organization meet its objectives in being well-run
and accountable to its stakeholders.
 Governance begins with the board or oversight
body.
 The board must understand and focus on the
needs of key stakeholders.
 Day-to-day governance is executed by the
management and the organization.
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Common Governance Components
1.
2.
3.
4.
5.
6.
7.
Board of Directors and Committees
Laws and Regulations
Business Practices and Ethics
Disclosure & Transparency
Enterprise Risk Management
Monitoring
Communication
OECD
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IIA Requirements
Standard 2110
The internal audit activity must assess and make appropriate
recommendations for improving the governance process in its
accomplishment of the following objectives:
 Promoting appropriate ethics and values within the
organization;
 Ensuring effective organizational performance management
and accountability;
 Communicating risk and control information to appropriate
areas of the organization; and
 Coordinating the activities of and communicating
information among the board, external and internal auditors,
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and management.
Auditor’s Role in Governance
Defined
Emulate
Exemplifying effective governance and living
and modeling the organization’s values – in
short, “walking the talk”.
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Auditor’s Role in Governance
Defined
Emulate
Exercise:
What are three ways Internal Audit can emulate
governance?
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Auditor’s Role in Governance
Defined
Evaluate
Conducting assessments of the organization’s
governance; this may include evaluating the
ethical culture, performance and management,
risks, and controls.
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Auditor’s Role in Governance
Defined
Evaluate
Exercise:
What are three ways Internal Audit can evaluate
governance?
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Auditor’s Role in Governance
Defined
Educate
Provide the board, management, and staff
with the information and guidance necessary
to effective discharge their governance duties.
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Auditor’s Role in Governance
Defined
Education
Exercise:
What are three ways Internal Audit can
provide governance education?
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Exercise
Auditor Role? If so, how?
 Assist board of directors in its self-assessment and
best practices.
 Assess Audit Committee effectiveness and
compliance with regulators.
 Review the audit committee charter and help legal
counsel.
 Help management and the audit committee hold
people accountable.
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Exercise, Cont.
Auditor Role? If so, how?
 Bring best practices ideas about internal controls and risk
management processes to audit committee members and
management.
 Verify that the organization has identified assigned
responsibilities and addressed all of the key legal and
regulatory requirements.
 Look for opportunities to leverage compliance activities and
capabilities to reduce costs and improve performance.
 Review the code of conduct and ethics policies, making sure
they are periodically updated and communicated to
management and employees.
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Exercise, Cont.
Auditor Role? If so, how?
 Perform an ethics review to assess the
understanding and perception of compliance
across organizational levels.
 Adhere to audit standards.
 Participate in ongoing dialogue with general
counsel, chief financial officer, and other senior
management officials.
 Inventory organizational risk compliance activities
and strive to integrate them into a common
methodology.
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Exercise, Cont.
Auditor Role? If so, how?
 Develop a code of ethics and conduct for auditors
and have each member of the department/team
sign acknowledging the code, including the CAE.
 Provide leadership workshops to management and
staff.
 Assist process owners in understanding, assessing,
designing, and documenting controls.
 Perform a strategic corporate governance audit or
ensure one is conducted.
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Exercise, Cont.
Auditor Role? If so, how?
 Conduct annual audits and report the results to
management and the audit committee.
 Administer and organization-wide climate
survey.
 Serve in the ethics oversight role or confer with
the organization’s ethics officer.
 Facilitate identification of key risk areas for the
organization as well as all key processes.
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Exercise, Cont.
Auditor Role? If so, how?
 Include information about corporate governance in audit
reports.
 Advise the board and management on the needed
improvements and changes in the governance structure
and design.
 Conduct audit surveys after each engagement – including
assessments of auditor professionalism – and provide a
copy of the results to the audit committee.
 Assist in establishing a governance communications
calendar and solicit input on needs and articles across the
organization.
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Navigating the Auditor’s Role
Emulating…
 Living organization’s values - walk the talk.
 Conduct training and stress the importance of
adherence to ethical standards.
 Hire carefully.
 Communicate regularly.
 Promote transparency.
 Follow the rules.
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Navigating the Auditor’s Role
Evaluating…
 Implement the required standards.
 Include governance evaluations in audits (as
applicable and appropriate).
 Utilize data and available tools.
 Monitor implementation of strategic plans.
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Navigating the Auditor’s Role
Educating…
 Present options and recommendations.
 Benchmark where possible.
 Communicate risk and control information to
appropriate areas of the organization.
 Promote ethics and values.
 Facilitate training/workshops.
 Act as a catalyst for change, advisior or advocating
improvements to enhance the organization’s
structure and practices.
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Governance Challenges
 Diversity of audience.
 Remaining independent and objective, yet being
part of the organization.
 Constant development of business knowledge,
insight, good judgment, and communications.
 No one-size-fits-all method to improve
organizational governance.
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Governance Challenges
No governance system, no matter how well
designed, will fully prevent greedy, dishonest people
from putting their personal interest ahead of the
interests ahead of others or the interest of their
organization.
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Addressing Governance Challenges &
Navigating Politics
 Ramp up communications.
 Place renewed focus on risk management and
governance process.
 Strengthen the risk assesment process.
 Operate with a more flexible and adaptable plan.
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Addressing Governance Challenges &
Navigating Politics
 Strengthen business knowledge.
 Strengthen your relationshsips and
communications with the organization’s other
governance, risk, and control functions.
 Enhance the efficiency of your audit process.
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Addressing Governance Challenges &
Navigating Politics
 Be open and honest.
 Don’t “discriminate” when sharing information
with the oversight body.
 Be aware of political “firestorms”.
 Pick you battles.
 Walk the talk.
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Summary
The auditor’s role is challenging.
Emulate – Walk the talk
Evaluate – Review
Educate – Inform
Be cognizant of politics but don’t be “political”.
Rise to the challenge.
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Thank you!
Contact information:
[email protected]
[email protected]
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