This document summarizes the agenda for the 2012 Gaming Conference held in Las Vegas in April 2012. It discusses the role and expectations of audit committees and internal audit functions. It outlines key responsibilities of the audit committee including oversight of financial reporting, risk management, and hiring/firing the chief audit executive and external auditor. It also describes the role of internal audit in assisting the audit committee and evaluating internal controls and risks. The document notes increasing expectations on internal audit around skills, focus areas, and value provided to stakeholders. It provides perspectives on enhancing audit quality, talent, and communications to better meet stakeholder needs.
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Audit Committee Needs for Insight on Expectations of Internal Audit
1. 2012 Gaming Conference
April 11 – 13, 2012 / MGM Mirage / Las Vegas, NV, USA
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2014 Gaming Conference
April 14 – 16, 2014 / The Mirage / Las Vegas, NV, USA
Audit Committee Need for Insight
Olivia F. Kirtley, CPA, CGMA
Audit Committee Chair
U.S. Bancorp & Papa John’s
Deputy President
International Federation of Accountants
2. International Federation of Accountants (IFAC)
Strengthening Organizations, Advancing Economies
• Represents Global Accountancy Profession
• 179 Member Bodies / Associates
• 130 Countries
• 2.5 Million Accountants
• 4 International Standard Setting Boards
• Independent Boards Supported by IFAC
• 100+ countries adopted
• 48 Language Translations
3. IFAC and IIA:
MOU to Leverage Mutual Interests
• Globally Advocate
• Good Governance
• Effective Risk Management
• Strong Controls
• Four Areas of Mutual Focus
• Strong Audit Committee
• Clear accountability of Risk & Controls
• Properly Operating Controls
• Adhering to Standards
• Supporting IA as 3rd Line of Defense
4. Critical Players
Financial Reporting Supply Chain
Preparer
Internal Audit
External Audit
Standard Setter / Regulator
Audit Committee / Board of Directors
Users of Financial Reports / Information
5. Audit Committee Role
• Oversight
• Control Environment & Financial Reporting
• Risk Management (with full Board / other Committees)
• Hiring/ Firing / Oversight - CAE & External Auditor
• Credible Challenge, Healthy Skepticism
• Accountability Framework - Significant Issues & Action Plans
• Support Internal Audit - Needs & Position
• Conduit between Board, Internal Audit and External Auditor
6. Internal Audit Role
• Assist Audit Committee with Oversight Responsibility
• Direct Communication & Reporting to Audit Committee
• Assess Current, Emerging and Strategic Risks for Audit
• Evaluate Effectiveness of Internal Controls & Risk Framework
• Independent, Objective - 3rd Line of Defense
• Match Skills & Resources to Current & Emerging Risks
• Report Findings / Areas of Concern
• Remediation Accountability & Follow up
7. Internal Audit Role: Great Expectations?
• Who are Key Customers / “Buyers” of IA?
• What should IA have more focus on?
• Does IA have right people strategy to deliver on mission & objectives?
• Evolving Skill Set Needs
• People Skills
• Business Acumen
• Leadership
• Various views & expectations of role IA plays
• Perceptions of IA Performance & Value
8. Great Expectations: IA Customer?
Audit Committee
Audit Committee
Management
Operational
Management
Internal Audit
50% Audit Committee
50% Executive
Management
Source: Deloitte Study
10. 0 10 20 30 40 50 60 70
Leveraging technology
Obtaining, training and/or sourcing talent
Improving quality and innovation
Delivering with a service-orientation
Delivering cost-effective services
Relationship with stakeholders
Focusing on critical issues
Aligning with stakeholder expectations
Great Expectations: Three Capabilities Viewed Lagging
11. Great Expectations: Increasing Skill Needs?
Audit Committee
Business Insight
Report Writing
IT
Data Analytics
Communication
-----
Project Management
Management
Business Insight
Report Writing
IT
Data Analytics
Communication
Fraud Detection
----
Internal Audit
Business Insight
----------
IT
Data Analytics
----------
Fraud Detection
Problem Solving
Finance/Accounting
Source:
Deloitte Study
12. Great Expectations: Greater Focus by IA?
Audit Committee
Assurance
IT
Finance
-----
-----
Management
------
IT
-----
Advisory
Operations
Internal Audit
-----
IT
-----
Advisory
Operations
Source:
Deloitte Study
13. What Do Audit Committees Worry About?
Top 10
1. Global Expansion - Preparedness / Awareness / Integration
2. IT - Complexity / Cybersecurity
3. People – Relevant Skills / Talent / SMEs
4. Risk - ERM Built In or Bolted On?
5. Regulatory Issues – Pace of Change, Fragmentation
6. Resources – Potential Misalignment
7. Crowded Agenda – Increasing Demands
8. Overall Culture
9. Audit Quality – Internal and External
10. Keeping Pace
14. Expectations of CAE
“License to Lead: Seven Personal Attributes”
1. Superior Business Acumen
2. Dynamic Communication Skills
3. Unflinching Integrity and Ethics
4. Breadth of Experience
5. Excellent Grasp of Business Risks
6. Gift for Developing Talent
7. Unwavering Courage
Source: License to Lead (2010) Korn Ferry & IIA
15. CAE & AC Chair
Communications Framework
Pre-Meeting Calls
Monthly Talks
Quarterly 3-way meetings:
CAE – ACC - CEO
Available 24/7 As Needed
17. INSPECT: People Are #1 Asset
• KNOW THE BUSINESS
• “Relevant” Talent
• Vital for effectiveness (and respect)
• Develop & Acquire
• Diversity
• Cultural Intelligence
18. INSPECT: Planning & Audit Quality
• Heightened Expectations
• “Satisfactory to Strong” Roadmap
• Leverage Technology
• Invest for Future – Coverage & Costs
• Multi-Year Audit Plan vs. Risks and Vulnerabilities
• Increasing & Emerging Risks
• Serious Examination of Adequacy of Resources
What would you do with 10% more ?
19. INSPECT: Potential Enhancements
• People - Talent vs. Risks annual review
• Transfer People In & Out for broader experiences
• Guest Auditor Program (77% used in Forbes Insight/ E&Y study)
• Audit Quality - Satisfactory to Strong Roadmap
• Measure & Report Progress
• Analysis - Root Causes, Implications Beyond Silos
• On Site Time - Materiality not only measure
• Risk Management –3rd Line of Defense
• Broaden Awareness - Cultural Training
• Be Resourceful - Get “Outside Your Four Walls”
20. INSPIRE: The Power of “And”
• IA Comparative Advantage: Insights and Elevated Position
• Uniquely positioned
• Silver Lining of regulatory intervention - new management appreciation
• Provide “Hindsight, Insight, Foresight”
• Look Forward, Reach out, Give back
• How & Why vs. What
• Benefits of built in vs. bolt on
• 80% think IA has room to improve & have positive impact on results (E&Y)
21. INPIRE: Potential Enhancements
• Highlight key risks to achieving strategic objectives
• traditionally very small % of audit plan / time
• Help anticipate as business changes
• Plain Language, not “audit speak”
• Open-Ended Questions
• Listen
• Guest Auditor /Subject Matter Experts
• Share winning practices from inside & outside company
• Recognition Programs – “Customers” & IA Team
22. ASSURE: JOB #1
• Clearly outline Audit Plans & Risk Coverage
•Depth & breadth of coverage ( SOX vs. full audit)
• Not only what IS being done, but what is NOT being done
•Approval of Plan Changes
•Significant Findings
•Repeat Issues
•Action Plans & Timelines
•Follow Up
•Overall Culture
23. ASSURE: Culture
“You all have heard of the
‘Tone at the Top’.
I talk about
the Tone at the Top,
the Tune in the Middle
and the Beat of the Feet at the Bottom.”
Mervyn
King, South Africa - Governance is King (2011)
24. ASSURE: Potential Enhancements
• Focused Reporting
• Executive Summaries
• Why it Matters
• vs. What it is
• Trend Analysis
• Follow up Matrix
• Significant Findings & Action Plans
• Executive (in camera) sessions
• Periodic “Clean Sheet of Paper” Review
25. IIA: INSPECT, INSPIRE, ASSURE
Audit Committee Needs for Insight
• Focus on Audit Quality & Innovation
• Right Size and Optimize Talent & Resources
• Align Resources & Critical Risks
• Build Trust & Deeper Relationships
• “And” Provide Thought Leadership
• Enable Success of Others
• Enhance Reporting & Communications
• Seek Candid Feedback on IA Knowledge & Performance
26. IIA: INSPECT, INSPIRE, ASSURE
How can the Audit Committee help YOU?
Support your Work
Enhance your Position
Champion your Value
27. Moving Forward
“Everyone in an organization is responsible for
helping to move forward with the mission,
but in addition, every single
employee/teammate/person must realize it is also
their responsibility to
look out for people on either side of them and help
them move in the right direction as well.”
Alison Levine, Team Captain -1st Everest expedition of American women
Editor's Notes
ALSO different views on the value of IA among your “customers”Exec Mgmt 42%Board 79%Difference may be level of interaction & detail
In PwC 2013 Study – 8 Core IA Capabilities surveyed – asking how is IA doing in meeting expectations?5 – 50%-60% satisfied3 viewed as lagging - Improving QUALITY & INNOVATION (40%)Obtaining, training & sourcing TALENT (35%)Leveraging TECHNOLOGY (20%)
I WANT TO CLOSE - with quote by Alison Levine - led fist expedition of American women to climb MT Everest (READ)CAE – move forward by developing Team – support & inspire ELT – Business Units IA – move forward by supporting AC & business leaders – lead them in right directionAnd AC has responsibility too in supporting YOU –enabling you to move forward, in right direction as wellTogether we are all better – better equipped to Hang in there thru storms - Make tough decisions - Reach new heights – Fulfill our Mission THANK YOU for having me today – glad to take QUESTIONS