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Corporate governance

audit committee

internal audit

Presented by:

Quratulain Butt

Hira Ikram

Sadaf Arif

Nabiha Ehsan

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Definition:

An operating committee of a company's

board of directors that is in charge of

overseeing financial reporting and

disclosure.

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Audit committee

composition

Minimum of 3non-execs

A tleast 1 withfinancialexpertise

objectives

Increase publicconfidence

Financialawareness of

non-execs

liaison withexternalauditor

functions

financialstatements

controls

internal audit

external audit

Whistle blowing

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The company should have an auditcommittee of at least three non-

executive directors ( or, in the case ofsmaller companies, two).

At least one member of the auditcommittee should have recent andrelevant financial experience.

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Assistingdirectors(particularly

executive directors) inmeetings their

responsibilities in respect offinancial reporting.

Increasing publicconfidence in the

credibility and objectivityof published financialinformation ( including

unaudited interimstatements ).

Strengthening the independent

position of a companys externalauditor by providing an additional

channel of communication.

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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 theeffectiveness of the audit process.

Developing and implementing policy on theengagement of the external auditor to supply non-

audit services. Reviewing arrangements for confidential reporting by

employees and investigation of possible improprieties(whistle blowing).

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Internal Audit

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internal audit

assignments

value for money

IT

financial

project auditing

procurement

HR

treasury

marketing

reports

formal report

shorter,momoreports

presentations

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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 operatingeffectively

The procedures put in place

to deliver good corporatereally work

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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.

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Systems are operating effectively

Internal controls are effective

laid down procedures are beingfollowed

Financial and other information beingproduced is sound and reliable

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Carrying out assignments

Producing reports of their findings

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If the internal audit department is to beeffective in providing assurance it needs tobe:

Well organized so that it has:

Well developed workpractices

Sufficiently resourced in terms of budgetsand people

competent staff whoreceive high quality

training

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Because internal auditors are employed bythe they are often managed as part of thefinance function

Internal auditors reports should beIndependent and objective

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Who is the report for? With any report the most important person in the

process is the readernot the writer.

The report should be customer focused

meeting organizational needs. The internalauditor should always be conscious of theorganizational philosophy, management stylesand reporting objectives.

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The purpose of any report is to summaries theresults of the work undertaken, so that lessons

can be learned and appropriate action taken.

The content of any report will be determined bythe 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

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T f i t

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Types of assignments

Generic Operational

Value formoney

Financialaudit

Projectauditing

IT

procurement

treasury

marketing

HR

1 V l f

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1-Value for money

Economy

Accomplishesgoals at Least cost

Effectiveness

Providingassurance that

the org.objectives ll be

achieved

Efficiency

Best use of

recourses toaccomplishesgoals

2 A dit f i f ti t h l

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2-Audit of information technology

We do this mainly from the external auditors point of viewmechanisms built into the systems which are effective in

reducing the risk of misstatementDifferent strengths and weaknesses of manual and IT based

systems are used here.

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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 canbecome a programme.

4 Fi i l i t l dit

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4-Financial internal audit

Financial auditing wastraditionally the mainarea of work for theinternal audit dptt.

the conventional tasks

of examining recordsand evidence to

support financial andmanagement reportingin order to detect errors

and prevent fraud

analyzing information,identifying trends andpotentially significant

variations from the norm

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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

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treasury

It is the process of managing cash flow and investmentswithin an organization to maximize the use of available

finances.

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The main limitations of internal audit are: Independencecan internal audit be truly

independent of the organization of which it is a part Variation of standardsnot uniform across the

profession. Compare this with external auditors who,on a global basis, have ISAs against which theirperformance can be measured

Relatively new professionstill evolving. Expectations gapproblem of what the internal

auditors role is perceived to be. Understanding of internal auditnegative view by

someperhaps seen as checking up on otheremployees on behalf of the bosses.

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Thank you!