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Conflict Minerals
Audit and Mutual
Recognition
Esther Rodriguez
KPMG
OECD
15 November 2013
How do upstream assessments and audits complement smelter/refiner
audits?
What does it mean for Accountancy Bodies to use ...
As ISAE 3000 auditors, can we rely on upstream audits?

■ Sometimes we have to rely on previous certifications / audits an...
How do industry smelter/refiner audit programmes provide mutual
recognition?
Challenges:
Certification /
Audit Guidance
iT...
How to best incorporate the progressive nature of due diligence as
recommended by the Guidance into audit programmes and p...
Disclosure of information - what can and should be made accessible to
auditors?

Refiner

Recycled Gold Trader
(Dubai)
- M...
Disclosure of information - what can and should be made accessible to
auditors?

Refiner

KPMG Audit

Recycled Gold Trader...
Thank you
esther.rodriguez@kpmg.co.uk
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KPMG-Day3-3TGKigali2013

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Presentation by KPMG on audits.

Day 3 of the 6th ICGLR-OECD-UN GoE Forum on responsible mineral supply chains, 15 November 2013.

Visit: http://mneguidelines.oecd.org/icglr-oecd-un-forum-kigali-2013.htm

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Transcript of "KPMG-Day3-3TGKigali2013"

  1. 1. Conflict Minerals Audit and Mutual Recognition Esther Rodriguez KPMG OECD 15 November 2013
  2. 2. How do upstream assessments and audits complement smelter/refiner audits? What does it mean for Accountancy Bodies to use ISAE 3000? ■ The independence, ethics and qualification of auditors ■ Main elements of an audit: – Risk based approach - This includes performing a risk assessment, planning and performing assurance procedures, gathering sufficient appropriate assurance evidence and performing an overall evaluation to form the assurance conclusion. – Assurance procedures are designed by the auditor based on the output of the auditor’s planning and risk assessment, which is unique for each engagement. – Risks are considered when a reasonable possibility of a material misstatement in the disclosures in the Compliance Report. It is therefore not possible to prescribe the assurance procedures that should be performed (or the sample sizes to be selected). © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 1
  3. 3. As ISAE 3000 auditors, can we rely on upstream audits? ■ Sometimes we have to rely on previous certifications / audits and we will have to exert judgement on whether that certification is reliable and performed according to our competence, and independent requirements. ■ This means: – evaluating the robustness and credibility not only of the auditor but of the audit system so that it enables us to rely on that certificate and not to duplicate effort. ■ Examples: – ICGLR – Dodd Frank and CFS © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2
  4. 4. How do industry smelter/refiner audit programmes provide mutual recognition? Challenges: Certification / Audit Guidance iTSCi Audits Conflict Free Smelter Program (CFS) Responsible Jewellery Council and RJC Chain of Custody Standard Based on: ? ISO standard 19011 ISO standard 19011 - The Paradox - Can ISAE3000 auditors perform CFS, RJC audits? - Need Criteria (Example from LBMA) ■ ■ ■ ■ ISAE 3000 World Gold Council ConflictFree Gold Standard DMCC LBMA Responsible Gold ICGLR 3rd party audits ■ ISAE 3000 Mandatory / ISO also acceptable ISAE 3000 and ISO 19011 In development Relevance: information sources used has a logical connection to the LBMA Responsible Gold Guidance; Completeness: all relevant factors that could affect the conclusions are not omitted; Reliability: the Refiner’s application is consistent across its operations and suppliers; Neutrality: the information sources used to inform the Refiner’s conclusions are free from bias; Understandability: the Refiner’s conclusions and the reasons behind them are clear - Can we use these audits as evidence? – Criteria – Scope and degree of testing to evaluate whether the audit conclusion in line with risks and materiality – Comfort that the audit has been done by an auditor with following competences: ■ Financial independence ■ Ethics requirement ■ Organisational and individual competence ■ Experience in non-financial assurance ■ Understanding of subject matter: Anti Money Laundering, KYC, Fraud and Bribery, Payments of taxes and royalties, ability to perform stock reconciliations, etc. ■ Industry expertise © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 3
  5. 5. How to best incorporate the progressive nature of due diligence as recommended by the Guidance into audit programmes and protocols? Our recommendation: • To follow the example of the WGC and the LBMA who have developed audit guidance to support the audit standards they recognize, be it ISO or ISAE 3000. • Time to revise lessons learnt from LBMA and other audits and issue further clarifications and best practice guidelines • • Challenges around the interpretation of conflict, high risk, acceptable evidence, going beyond tier 1 suppliers… Establish an Audit Working Group to align all different standards and ensure there is mutual recognition Suggested Content for Audit Protocol: • Context • Key assurance concepts: meaning of assurance, timing, scope • Guidance on application of specific assurance concepts: subject matter, criteria, evidence, frequency, materiality, competencies • Guidance on the assurance approach: site selection, use of existing certifications • Conformance and non-conformances and Action Plans © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 4
  6. 6. Disclosure of information - what can and should be made accessible to auditors? Refiner Recycled Gold Trader (Dubai) - Melted Gold Bars Mines (Europe) No details of composition Due Diligence: • Regular visits by Refiner CEO • Declaration letter signed by Trader’s CEO Low Risk No Red Flags Low Risk No Red Flags © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 5
  7. 7. Disclosure of information - what can and should be made accessible to auditors? Refiner KPMG Audit Recycled Gold Trader (Dubai) - Melted Gold Bars Recommendation: Mines (Europe) Evidence requested included: -Gold composition analysis -Customs declarations -Delivery Notes -Invoices Mined Gold from: Ghana Other African countries? High Risk • Guidance on what is considered acceptable evidence, e.g. Declaration letter not being sufficient • Recycled Gold Additional Due Diligence: • Is the recycled gold declared actually recycled? • Guidance on due diligence expected when recycled gold is provided in melted bars Red Flags © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 6
  8. 8. Thank you esther.rodriguez@kpmg.co.uk
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