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The 4th AFIIA Conference

Insight to Foresight: The New Imperative for InternalAudit & Governance

QUALITY ASSURANCE

ACCRA – GHANA

18 MAY 2017

Agenda

• Introduction

• Insight to Foresight

• Quality Assurance

• Maturity Model – The ‘Aha’ Moment

• Conclusion

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Introduction

Quality: Degree of Excellence as seen by ‘Users’.

Insight: Clear and in-depth understanding of asituation to solve a problem or situation.

Foresight: Ability to predict what will be needed inthe future. Plan actions based on this knowledge.

Oversight: Watchful care, supervision, orstewardship.

Governance: The action or manner of governingan organisation or state.

Role of IA/Revised mission in IPPF: Enhance andprotect organisational value by providing risk-based and objective assurance, advice and insight.

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Insight to Foresight

Understandcurrentsituation/problem,solve it andpredict thefuture

4 Facets of Insight – David Rock, ED of Neuro-Leadership Institute

Awareness of Dilemma – Identify the problem to be solved Reflection – Create links and tap into more intelligence Illumination – Take courage to reflect more and think less or at least less logically Motivation – The ‘Aha’ Moment

Dilemma for Internal Audit “Now More than ever, internal auditors will need to

be at the top of their games in order to successfullyaudit at the speed of risk.” Richard Chambers, IIAPresident

Supervisors and Regulators expect more from InternalAudit.

Understand prevailing culture in organisation usingroot cause analysis techniques.

Why is Insight relevant to Internal Audit?

IA needs to challenge current practice, champion best practice and be a catalyst for improvement to deliver strategic objectives. IA has ability to stand back from day –to – day activities and has wider understanding of the organisation. IA has ability to make connections and highlight things not known to management.

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How can I be a more insightful Internal Auditor?

This does not happen by accident. It takes deliberate action.

Insight comes with experience.

Action Matrix:

1. Develop knowledge of your organisation and sector

2. Talk to more people within and outside your organisation

3. Keep track of what is happening in the IA profession

4. Identify a senior person to be your Coach

5. Change your perspective

6. Find Parallels

7. Ask more questions

8. Don’t take things for granted

9. Identify trends and connections

10. Change the way you get messages across

11. Use Metaphors

12. Conduct Quality Assessments

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Quality Assessments

What is QA?R

Rationale for QualityAssurance?

Who needs QA?R

Who Benefits from QA?R

Evaluation of Internal Audit’s compliance with:

Standards, Definition of Internal Auditing and Code of Ethics

Internal Audit and Audit Committee Charters

Organisation's Governance, Risk and Control assessments; Successful/Best practices

Builds confidence, trust and professional credibility of IA

Enhances management and stakeholder buy -in

Response to management concerns and expectations

Promotes compliance with IPPF

Standard 1312 requires IA to have at least 1 external assessment every 5 years

In-house Internal Audit departments

Outsourced Internal Audit departments

Co-sourced Internal Audit departments

Various Stakeholders:

Shareholders, Board and Management

Regulators and other Assurance Providers

Customers/clients

Internal Audit – A Fine Balancing Act

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Pillars of Quality Assurance

QA

Framework

Self Assessment

Full ExternalAssessment

Establish QAIP

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Pillars of Quality Assurance Cont’d:

Establish a QAImprovementProgramme

The IPPF

1300 – Develop & maintain a QAIP that covers all aspects of IA activity.

1310 – Internal & External Assessments

1320 – Communicate results to senior Management & the Board

1321 – Use of “conforms” statement

1322 – Disclosure of Nonconformance

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Pillars of Quality Assurance Cont’d:

On going Monitoring:

Conformance to IIA standards: 2200 : Engagement Planning 2300 : Performing the Engagement 2400 : Communicating Results 2500 : Monitoring Progress

Periodic Self Assessment:

In addition to on going monitoring, Conformance to IIA Standards: 1000 : Purpose, Authority & Responsibility 1100 : Independence & Objectivity 1200 : Proficiency & Due Care 1300 : QAIP 2000 : Managing the IA Activity 2100 : Nature of Work 2600 : Communicating the Acceptance of Risk Definition of Internal Auditing Code of ethics

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Road map to Quality Assurance

QA is a journey:Deming Cycle

Rating for QA:

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Experience with Quality Assurance

Common QA non compliance exceptions: Inappropriate CAE reporting relationships Out-of-date Charters Client perception of inadequate staff knowledge No formalised risk assessment process Inadequate QAIP Consulting omitted from the mission & Charter Inadequate IT coverage or technical skills Lack of performance measures

Challenges with QA: Several IA functions have never had an external QA A number of IA functions are less than 5 years old. IA is not regulated Not aware of the requirement Cost in money & time

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IA Quality Assessment – Bridging the Gap IA Leadership – Actions to take

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The Way Forward – Building Blocks

Expectations are clearly articulated & communicated IA clearly defines, articulates and has metrics to measure its mission &

value IA Plan is regularly updated to respond to changes in entity & business

environment Appropriate time & effort is spent to assess current & emerging risks Appropriate skills mix Leverage internal & external resources Productivity of IA staff is measured & managed Audit methodology is standard & simplified Investments in IA are based on ROI approach Data analytics are deployed for alignment & efficiency IA service provides balance of objectivity & value. Formal quality reviews are regularly done to identify improvement

opportunities. Innovation is embedded in culture of IA.

“It is not that value provided by Internal Audit has necessarily decreased, the value may be the same but a higher investment in thefunction may cause the illusion of decreased value. Executives and Boards are looking for higher return on their investment.”Jean Pierre Verster, Capitec Bank, South Africa

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Conclusion

Quality does not just happen; its earned. Combination of right people, right systems & commitment to excellence. It is a Journey & not a destination Dynamic business environment Dynamic stakeholder expectations Audit in the right context is what adds value Regular QA is critical in our IA journey from Insight to Foresight.

“As Africans, we need to share common recognition that all of us stand to lose ifwe fail to transform our continent” Thabo Mbeki

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Thank youfor the kind attention

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