Keakook Song, PhD&CFEDirector, Public Audit Research
How to Increase SAIs’ Capacity forPreventing Corruption in the Public Sector
- Section IV, Workshop 2 (UN & INTOSAI) –
June 25, 2014
Contents
1. Introduction
2. Corruption3. Anti-Corruption Movement 4. National Integrity System 5. INTOSAI Activities for Anti-Corruption6. SAIs’ Capacity Building7. Audit Mission, Vision and Requirements8. Audit Functions and R&R9. Audit Methods10. Quality Assurance of Internal Audit11. Conclusion
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1. Introduction
� Hyper-connected Society : Anti-Corruption
Movement by UN and INOTOSAI
� Ferry Disaster in Korea exposed Deeply-rooted Corruption : A Set of Anti-Corruption Bills
� National Integrity System and SAIs
� SAI’s Capacity Building for Preventing Corruption : Changes in Audit Mission to Methods
and Quality Assurance of Internal Audit3
2. Corruption
� C (Corruption) = M (Monopoly Power) + D (Discretion) –A (Accountability) ⇒ Klitgaard (1996)
� C = M + D –A (Transparency)
⇒ Dye and Stapenhurst (1998)
* ACFE’s 2014 Report to the Nations (Global Fraud Survey) : Global fraud loss of US$3.7 trillion (5% of revenues)
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3. Anti-Corruption Movement
� US, Foreign Corrupt Practices Act (1977)� Transparency International (1993)� Inter-American Convention Against Corruption (1996)� OECD, Convention Against Bribery (1997)� Council of Europe’s Criminal and Civil Conventions
(1999)� African Union Convention on Preventing and
Combating Corruption (2003)� UN, Convention Against Corruption (2003)
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4. National Integrity System (A)
� Eight Integrity Pillars for the Nation’s Sustainable Development (Langseth et al, 1997) political will, administrative reforms, “watchdog” agencies, parliament, public awareness/involvement, judiciary, media, private sector
* Watchdog Agencies : Rights, Reform, Audit Watchdogs
supreme audit institutions (SAIs), anti-corruption commissions, ombudsman offices
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5. INTOSAI Activities for Anti-Corruption
� INTOSAI/UN Seminar (1996) and Symposium (2009) for the Fight against Corruption
� INTOSAI Congress’ Recommendations on the Fight against Corruption (1998), Task Force on the Fight against International Money Laundering (2002), Working Group on the Fight against Corruption and Money Laundering (2007)
� INTOSAI Platform for Public Accountability in Partnership with UN Chaired by the SAI of Korea (2007)
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6. SAIs’ Capacity Building
� INTOSAI Capacity Building Committee’s Guide (2007) - Five Step Iterative Process of Capacity Building
- Three Aspects of Capacity Building
A. Professional Audit CapacityAudit Methods, Manuals, Developing/Training Staff
Work Planning and Management, Quality Assurance
B. Organizational CapacityForward Planning, Leadership, Managing Resources,
Governance and Accountability Arrangements
C. Capacity to Deal with the External Environment9
7. Audit Mission, Vision and Requirements
� Audit Mission : Two-track MissionsEnhancing both Accountability and Integrity
� Audit Vision : Upgrading and Enhancing the Value ofthe Organization
� Audit Requirements Independence (organizational, operational, financial), Professionalism, Integrity (e.g. SAINT : Self-Assessment of
Integrity, NCA), Protection for Whistle Blower (e.g. Red
Whistle Helpline for Anonymity, KAMCO)10
8. Audit Functions and R&R (A)
� Audit Functions - Hunting Dog > Watchdog > Guide Dog- Oversight > Insight > Foresight
* Accountability Organization Maturity Model (US GA O, 2006)
Combating Corruption, Enhancing Transparency, Assuring Accountability, Enhancing 5E, Increasing Insight, Facilitating Foresight
� Audit Roles and Responsibilities Directing > Consulting > Coaching > Supporting Self-Audit
(e.g. Audit Manual, Checklist, Full Disclosure by Internet, SNS)11
9. Audit Methods (A)
� From Single Audit Type to Comprehensive Audit :Encompassing Compliance Audit, Financial Audit and
Performance Audit & Integrating Governance, Risk and
Control (IIA)
* System-based Audit (2003 to 2008, Korea)Identifying Core Problems thorough Preliminary
Study and Data AnalysisAcross-the-Border Examination of the System for Drawing up Fundamental Remedies
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9. Audit Methods (B)
� Risk-based Audit : Audit Objects by Risk Assessment
� e-Audit System :CMS (Continuous Monitoring System) by CAATsEDW (Enterprise Data Warehouse) by OLAPAMS (Audit Management System) for all activities
� Citizens Participatory Audit (e.g. Audit Request System,
BAI)
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9. Audit Methods (C) : RBA (KAMCO)
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Subjects of Risk Management
Risk Management & Assessment
Audit Management
Audit Information System
Integrated Planning Division
e-Approval System
SR Support Division
Fund Management
Division
Performance Management
Division
Information System Division
Identifying Risk Risk
Profiling
RatingRisk
Rating
Risk Assessment
SelectingAudit
Objects
Checklist
Audit Results
Audit Planning
Audit Conducting
Audit Report
Post Audit Management
Providing Field Information
Audit Strategy Information
System
DM Information
System
Analysis & Processing
Creating Audit Information
Audit Knowledge Information
System
Classification & Search
Creating Audit Idea
`
9. Audit Methods (D) : CMS 1 (KAMCO)
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Management Goals
Monitoring Items Early Warning (EW)Management of Risk Response
• Strategy and Operating Goal
• Reporting Goal• Compliance Goal
• Risk Registration
• Analysis of Risk Trends
• Data Analysis
• Notice Mgt. (SMS,
e-mail)• EW History Mgt.• Rule Setting
• Request for Risk Explanation
• Mgt. of Risk Explanation• Mgt. of Risk Explanation
Results
Integrated Dashboard
Monitoring Reporting
Selecting Risk
Related to Strategy
Risk Pool
Data Analytics
10. Quality Assurance of Internal Audit (A)
� Guidelines for Internal Control Standards for the Pubic Sector (INTOSAI, 2004)
� Enterprise Risk Management-Integrated Framework (COSO, 2004) : Control Environment, Risk Management, Control Activity, Information & Communication, Monitoring - Efficiency and effectiveness of operations - Reliability of financial reporting- Compliance with applicable laws and regulations
� International Standards for the Professional Practice of Internal Auditing (IIA, 2008)
� Standards for Internal Control in the Federal Government -“Green Book” (US GAO, 3rd revision in 2014)
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10. Quality Assurance of Internal Audit (B)
� Assessment of Internal Audit Capacity and FeedbackInternal Auditing Capability Model(IA -CM) for the Public Sector (IIA, 2009) Service and Role of IA, People Management, Professional
Practices, Performance Management and Accountability, Organizational Relationships and Culture, Governance
* Certificates by SAIs (e.g. ISO 9000)
* Developing / Training Auditors : Competency-based
Curriculum
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10. Quality Assurance of Internal Audit (C)
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Operating System of the Internal Audit of the KAMCO
Audit Strategy Meeting Presided over by the CAE
Predicting Management Risks and Mid-Long Term Business Outlook, and Enhancing the Value of the KAMCO
Operating Directions for Internal Audit Activities
Watchdog → Guide dog
•
• Noncompliance with Laws
and Regulations
• Budget Waste
• Detecting Corruption
• Post-Action Control
Proposing Alternatives to Enhance 3E (economy, efficiency, effectiveness)
Oversight Audit(Traditional Audit)
Insight Audit(System Audit))))
Foresight Audit(Consulting Audit)
11. Conclusion
� Enhancing Accountability and Integrity in the Public Sector by SAIs’ Capacity Building : Comprehensive Audit
� Changing Audit Functions and R&R : Foresight, Self-Audit
� Improving Audit Methods : RBA, e-Audit System, CPA
� Assuring Internal Audit Quality : Assessment and Feedback
� International Cooperation is vital in Anti-Corruption.26
References
� Keakook Song(2012a). Citizens Participatory Audit.
� ______(2012b). Readings in International Issues of Auditing.
� ______(2013a). Theory and Practice of Internal Audit of Public Institutions.
� ______(2013b). Case Studies on Public Audit.
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