audit committees in the european public sector€¦ · 3 enhancing governance through internal...
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Enhancing governance through internal audit www.eciia.eu
Enhancing governance through internal audit
Audit Committees in the European
Public Sector
Paper from ECIIA Public Sector Committee
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Enhancing governance through internal audit www.eciia.euEnhancing governance through internal audit
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ECIIA Public Sector* set up in 2018
Objective is to promote good governance in the European
Public Sector
First paper prepared by the Committee with representatives
from various countries:
* It includes government entities,ministries,public agencies,local government, municipalities
and other public entities
Background
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Development and repositioning of Audit Committees in the
Financial Services Sector after the crisis.
Impact on other sectors:
Request for more information
Need for greater accountability
Focus on governance, risk management, controls, ethics and
culture
Background
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General principle
• Board* or equivalent is ultimately responsible for governance
• The establishment of an Audit Committee is a key support for the Board
• The Audit Committee providessystematic oversight of the
different assurance providers
• The Audit Committee has a clear mandate (AC Charter)
* Highest level governing body
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An Audit Committee is…• An Audit Committee can be defined as
a sub-committee in the governing body
that will make arrangements for internalaudit and facilitate the completion of
external audit
• An independent body answerable
directly to the Board and responsible for
verifying the organisation’s governance,
risk management and internal controls
practices.
• A Governance body charged with oversight of the organisation’s audit and
control functions (IIA Global)
• A Committee of the Board of Directors
focus on financial reporting, risk
management (business and financial),
compliance with significant legal, ethical
and regulatory requirements (Intosai)
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Existence of Audit Committees today
Survey in 12
nations and in
the EuropeanCommission
AC is mandatory
in 2 countries (France,UK)
Internal Audit
Progress
Committee is
mandatory
in European
Union
Institutions
SupervisoryBody in Italy
No
obligation
in other
countries
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Effective Audit Committees
• Have a clear mandate, purpose and role
(Terms of Reference/Charter)
• Be understood in the organisation (Public Terms of Reference/Charter)
• Be independent
• Have an effective Chair and appropriate
assistance
• Have access to organisation’s Board, Management and staff
• Have the right skills-business knowledge
• Understand the organisation objectives,
risks
• Be trained
• Assess the members and the Committee
regularly
Audit Committees need to:
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Audit Committees Benefits for the organisation
• Promote strong ethical culture,
good governance and financial
management
• Promote confidence in the
reporting, controls, risk
management
• Give independent and objective
overall assurance to the Board
• Assist the Board in its
responsibilities
• Coordinate the work of the
different assurance providers,
including external auditors
Significant contribution to
effective governance:
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Audit Committees Benefits for internal audit
• Educate the Board and other
Committees about internal audit
added value and basics about
risk management and internal
controls
• Ensure internal audit
independence
• Monitor the quality and
effectiveness of the internal audit
work
• Monitor Management response to
internal audit and external audit
recommendations
Support and challenge
internal audit function:
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Audit Committees creation obstacles
• Insufficient interest of the Board
• Misunderstanding of the role and benefits of Audit Committees
• Lack of mandation or legal obligation
• Costs
• Difficulty to find the « right » Audit Committee members
• Lack of internal audit function
• Weakness of the second line of defense
• Internal audit department with one person and no second line of
defense
The main obstacles are:
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Conclusions
The ECIIA recommends that all Nations
positively consider the establishment of Audit
Committees within their public sector