Setting IA Systems in the Companies, Role of IA and Its Importance. Ali Kamil UZUN April 27, 2007 Antalya

Transcription

1 Setting IA Systems in the Companies, Role of IA and Its Importance. Ali Kamil UZUN April 27, 2007 Antalya

2 Ali Kamil Uzun, CPA, CFE Deloitte Advisor of Board of Directors. He worked as a Financial Controller in the Financial Control and Coordination Group of OYAK. He was a committee member and chairman of the Audit Committee in the Board of Directors in Adana Çimento Sanayii T.A.Ş., Bolu Çimento Sanayii A.Ş., Hektaş Ticaret T.A.Ş. He has 27 year implementation and management experience in the areas of Internal Auditing, IT Auditing and TQM in various industry and finance institutions. He served in the executive management in the fields of HR, Training and Communication. He is the founder president of The Institute of Internal Auditing in Turkey (TİDE). He has pioneered the provision of professional organization, the implementation and becoming widespread of international standards and the initiation of certified internal auditing programme and examination regarding internal auditing in Turkey. He served as a member of the Management Board in the European Confederation Institutions of Internal Auditing (ECIIA). Certified Public Accountant in Turkey and CFE ( Certified Fraud Examiner ). Graduated of Istanbul University, Faculty of Business Administration. 2

3 Contents Development, Regulations and Effects Corporate Governance Internal Control Systems Internal Auditing How to implement Internal Auditing as a critical success factor within Companies Conclusions and Recommendations 3

4 Development, Regulations and Effects

5 Development, Regulations and Effects Development and Regulations : General Perspective EU Harmonization Process EU Harmonization Process Regulations Compliance Basel II Credit Process Ratings Guarantee and Funding Cost International Invesments and Cooperations Privatisation Mergers, Acquisitions Due diligence Corporate Governance Principals and Harmonization Corporate Governance Principals Corporate Governance Principals Harmonization Report Corporate Governance Index Regulations SPK BDDK TTK 5

6 Global and National Developments within Internal Auditing IIA Founded CIA Examination 1978 International Internal Auditing Standards Developed ECIIA Founded 1995 TİDE Founded 1997 First National Professional Conference 1998 International Internal Auditing Standards Translated to Turkish 2000 CIA Examination Began in Turkey 2001 Internal Auditing and Risk Management Regulations Introduced within Banking New International Internal Auditing Standards Sarbanes-Oxley Act SPK Audit Committee Regulations Introduced 2003 Audit Committee Members Appointed SPK Corporate Governance Principals Announced 2004 Corporate Governance Harmonization Report Introduced 2004 Internal Auditing Regulations Introduced within Public Sector 2005 ECIIA Position Paper Introduced 2005 CIA Examination Translated in Turkish 2005 New Banking Law 2006 BDDK Regulations 2007 New Turkish Trade Law 6

7 Corporate Governance

8 The Approach of Corporate Governance Corporate governance refers to the approaches and principles assuring; Efficiency and productivity in business activities, Reliability in reporting, Compliance with regulations and Protection of shareholders and stakeholders rights and interests, Based on the principles of equal opportunity to all, transparency, accountability and responsibility In company management, business processes and relations with shareholders and stakeholders. 8

9 Corporate Governance Principals Corporate Governance Principals : General Perspective Shareholders Disclosure and Transparency Corporate Governance Stakeholders Board of Directors 9

10 Corporate Governance Shareholders and Stakeholders Asurance Asurance Board of Directors Audit Committe External Audit Management Consulting Asurance Internal Audit 10

11 The Effectiveness of Corporate Governance Success Factors within Corporate Governance Board of Directors External Audit Effective Corporate Governance Internal Audit Management 11

12 Internal Control Systems

13 Internal control systems Internal controls have been developed to provide reasonable assurance that an organisation s business objectives will be achived and undesired risk events will be prevented or detected and corrected. Management normally establishes controls designed to achieves its business objectives, which include : Effectiveness and efficiency of operations Reliability of financial reproting and information Compliance with applicable laws and regulations 13

14 Importance of Internal Control Systems Operations Promotes efficiency and effectiveness of operations through standardized processes Ensures the safeguarding of assets through control activities. Financial Promotes integrity of data used in making business decisions. Assists in fraud prevention and detection through and creates of an auditable trail of evidence. Compliance Helps maintain compliance with laws and regulations through periodic monitoring. 14

15 Internal Control Systems Internal Controls Organisation and Authorisation Policy and Procedures HR Management Systems Internal Control Systems Accounting / Financial Control Budget MIS 15

16 Process / Flow and Controls Processes Sub processes Risks Activities Control Objectives/ Requirements Control Activities Control Tests 16

17 Internal Audit

18 Definition of Internal Auditing Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. 18

19 Development of Internal Audit Activity... Overview of Development of Internal Audit Activity Traditional approach Development process Modern approach Transaction oriented Internal approach Participation Process oriented Strategic partnership and support Financial Risk Management Risk Definition Enterprise Risk Management Internal Auditor Detection Prevention Increased effectiveness Consultancy Change of Internal Auditor Skills 19

20 Development of modern internal auditing 1950 s Safeguarding of assets, 1960 s Reliability of organisation s data, 1970 s Compliance auditing, 1980 s Auditing of institute effectiveness, 1990 s Objectives by auditing, 2000 s Risk based auditing. 20

21 The Role of IA in adding value Internal Audit: Is an independent and objective function. Evaluates productivity and effectiveness of the internal control system. Recommends how a reliable internal contol system can be established. Plays role in improvement of processes, development of human resources and internal communication. Evaluates effectiveness of and improve risk management and corporate governance processes. Helps prevent errors and fraud. Contributes to development of the organization parallel to its targets, adds value. 21

22 Various types of IA The Reliability of Financial Reports Financial Audit Compliance with Regulations Compliance Audit Efficiency, Effectiveness and Economic Value of Operations Operational Audit The Reliability of IT Systems IT Audit 22

23 The Starting and Establishing of IA Activities The Starting and Establishing of IA Activities : General Perspective In-sourcing Organisation s Scale Out-sourcing Starting and Establishing IA Activities Management Policy Co-sourcing Legislations 23

24 The Starting and Establishing of IA Activities The Starting and Establishing of IA Activities - Process Flow Preparing Charter Assessment of Internal Controls Positioning on the Organisational Chart Starting and Establishing IA Activities Risk Assessment Preparing Job Descriptions Annual IA Plan 24

25 How to implement internal audit as a critical success factor within companies

26 How to ımplement IA as a critical success factor within companies Success Factors : General Perspective Motivation and Top Management Support SWOT Analysis and Road Map HR, Technology and Competence Training and Certification Critical Success Factors Professional Supervisory and Auditing Functions Audit Committee - Relationship between External and Internal Audit Effective Partnership 26

27 Conclusion and recommendations

28 Conclusion and Recommendations Collective Process Learning and Changing Process Implementation Cost Competition and Advantage Process Effective Partnerships Top Management Support Expert ande Professional Management Motivation Communication 28

29 Deloitte Turkey Member of Deloitte Touche Tohmatsu