Corporate governance

audit committee internal audit

Presented by:
Quratulain Butt

Hira Ikram Sadaf Arif Nabiha Ehsan

Definition:

An operating committee of a company's board of directors that is in charge of overseeing financial reporting and disclosure.

Audit committee

composition

objectives

functions

Minimum of 3 non-execs

Increase public confidence

financial statements

A tleast 1 with financial expertise

Financial awareness of non-execs

controls

liaison with external auditor

internal audit

external audit

Whistle blowing

The company should have an audit committee of at least three nonexecutive directors ( or, in the case of smaller companies, two).

At least one member of the audit committee should have recent and relevant financial experience.

Assisting directors(particularly executive directors) in meetings their responsibilities in respect of financial reporting.

Increasing public confidence in the credibility and objectivity of published financial information ( including unaudited interim statements ).

Strengthening the independent position of a companys external auditor by providing an additional channel of communication.

Monitoring the integrity of the financial statements. Reviewing the companys internal financial controls. Monitoring and reviewing the effectiveness of the internal audit function. Making recommendations in relation to the appointment and removal of objectivity and the effectiveness of the audit process. Developing and implementing policy on the engagement of the external auditor to supply nonaudit services. Reviewing arrangements for confidential reporting by employees and investigation of possible improprieties (whistle blowing).

Internal Audit

internal audit

assignments

reports

value for money IT

procurement HR

formal report shorter,momo reports presentations

financial
project auditing

treasury
marketing

Internal auditor considers that how well the company is actually being run in practice. Therefore listed companies need for a separate department within the company is required:

Systems are operating effectively

The procedures put in place to deliver good corporate really work

Scale, diversity and complexity of activities Number of employees Cost/benefit consideration The desire of senior management to have assurance and advice on risk and control.

Systems are operating effectively Internal controls are effective laid down procedures are being followed Financial and other information being produced is sound and reliable

Carrying out assignments

Producing reports of their findings

If the internal audit department is to be effective in providing assurance it needs to be:

Sufficiently resourced in terms of budgets and people

Well organized so that it has:

Well developed work practices

competent staff who receive high quality training

Internal auditors reports should be Independent and objective

Because internal auditors are employed by the they are often managed as part of the finance function

Who is the report for?

With any report the most important person in the process is the reader not the writer. The report should be customer focused meeting organizational needs. The internal auditor should always be conscious of the organizational philosophy, management styles and reporting objectives.

The purpose of any report is to summaries the results of the work undertaken, so that lessons can be learned and appropriate action taken. The content of any report will be determined by the nature of the assignment. Short and sweet, Clear, concise, easy to read. Measurable/quantifiable outcomes clear recommendations about how this is to be done Avoid surprises Fairness

Generic

Types of assignments Operational

Value for money

procurement

Project auditing

marketing

Financial audit

IT

treasury

HR

1-Value for money

Economy Accomplishes goals at Least cost

Efficiency Best use of recourses to accomplishes goals

Effectiveness Providing assurance that the org. objectives ll be achieved

2-Audit of information technology

We do this mainly from the external auditors point of view mechanisms built into the systems which are effective in reducing the risk of misstatement Different strengths and weaknesses of manual and IT based systems are used here.

3-Project auditing Project auditing is about looking at a specific project:

commissioning a new factory

implementing new IT systems

A number of projects when taken together can become a programme.

4-Financial internal audit

Financial auditing was traditionally the main area of work for the internal audit dptt.

the conventional tasks of examining records and evidence to support financial and management reporting in order to detect errors and prevent fraud

analyzing information, identifying trends and potentially significant variations from the norm

 procurement

It covers that the org is achieving vfm The right people The right amount For the right goods and services

marketing

Did the campaign deliver on its objectives Possible breaches of regulatory requirements Where the proper procedures followed in awarding any external contracts(tenders)

HR

Policy Recruitment Pay and benefits administration Performance management Training development Disciplinary and grievance

treasury

It is the process of managing cash flow and investments within an organization to maximize the use of available finances.

The main limitations of internal audit are: Independence can internal audit be truly independent of the organization of which it is a part Variation of standards not uniform across the profession. Compare this with external auditors who, on a global basis, have ISAs against which their performance can be measured Relatively new profession still evolving. Expectations gap problem of what the internal auditors role is perceived to be. Understanding of internal audit negative view by some perhaps seen as checking up on other employees on behalf of the bosses.

Thank you!