Financial Statement Closing Process Audit Report Report Nr. 3/14 August 26, 2014

Transcription

1 Distribution: Financial Statement Closing Process Audit Report Report Nr. 3/14 August 26, 2014 To: President & CEO Senior Vice President & Chief Financial Officer Vice President & Corporate Controller Assistant Corporate Controller Director, Corporate Accounting CC: Senior Vice President & Chief Risk Officer Senior Vice President, Corporate Affairs & Secretary Senior Vice President, HR & Communications Senior Vice President, Business Development Senior Vice President, Business Solutions & Innovation Senior Vice President, Financing Senior Vice President, Insurance Manager, Financial Planning & Reporting Manager, Insurance Accounting & Costing Manager, Treasury Accounting Director, Insurance Governance Director, Strategic Planning & Stakeholder Relations Principal, Office of the Auditor General Director, Office of the Auditor General Audit Team: Souhail Sadaka Adnan Zia Vice President, Internal Audit Monica Ryan

2 Table of Contents Introduction... 3 Audit Objectives & Scope... 3 Internal Audit Opinion... 3 Audit Findings & Action Plans... 4 Conclusion... 5 Financial Statement Closing Process August 26,

3 Introduction In accordance with our 2014 Audit Plan, Internal Audit (IA) performed an audit of the key controls related to the Financial Statement Closing Process (FSCP). EDC s financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and are submitted to the Board of Directors on a quarterly basis for their review and approval prior to their publication. FSCP includes the controls and monitoring mechanisms which ensure the objectives of producing accurate, complete and timely financial statements. Audit Objectives & Scope The overall objective of this audit was to evaluate the operating effectiveness of FSCP controls. The scope of the audit included controls relating to: journal entries, account reconciliations, opening and closing of financial periods, mapping of the chart of accounts to the financial statements, review of the financial reporting package, monitoring of IFRS changes, and documentation of the closing process. Internal Audit Opinion In our opinion, the Financial Statement Closing Process is Well Controlled 1. We found that key controls pertaining to FSCP are effectively designed and operating as intended. Two moderate 2 issues were noted and are described in the section that follows. Management has agreed to implement the corrective actions no later than Q Our standard audit opinions are as follows: - Strong Controls: Key controls are effectively designed and operating as intended. Best in class internal controls exist. Objectives of the audited process are most likely to be achieved. - Well Controlled: Key controls are effectively designed and operating as intended. Objectives of the audited process are likely to be achieved. - Opportunities Exist to Improve Controls: One or more key controls do not exist, are not designed properly or are not operating as intended. Objectives of the process may not be achieved. The financial and/or reputation impact to the audited process is more than inconsequential. Timely action is required. - Not Controlled: Multiple key controls do not exist, are not designed properly or are not operating as intended. Objectives of the process are unlikely to be achieved. The financial and/or reputation impact to the audited process is material. Action must follow immediately. 2 The ratings of our audit findings are as follows: Major: a key control does not exist, is poorly designed or is not operating as intended and the financial and/or reputation risk is more than inconsequential. The process objective to which the control relates is unlikely to be achieved. Corrective action is needed to ensure controls are cost effective and/or process objectives are achieved. Moderate: a key control does not exist, is poorly designed or is not operating as intended and the financial and/or reputation risk to the process is more than inconsequential. However, a compensating control exists. Corrective action is needed to avoid sole reliance on compensating controls and/or ensure controls are cost-effective. Minor: a weakness in the design and/or operation of a non-key process control. Ability to achieve process objectives is unlikely to be impacted. Corrective action is suggested to ensure controls are cost-effective. Financial Statement Closing Process August 26,

4 Audit Findings & Action Plans 1. Policies and Procedures Policies and procedures provide the framework within which an organization operates. Clear policies and procedures support effective decision making and delegation because they provide guidelines on what people can do, what decisions they can make and what activities are appropriate. During the audit, we found that a regular process is not in place to periodically review policies and procedures, including those posted on Livewire. For example, we found that Livewire has outdated versions of policies and at times old versions of procedures are not removed once the updated versions are posted. Management has agreed to implement an annual review of accounting-related policies and guidelines with the objective of making any required updates. This will include updates to documents posted on Livewire as needed. Rating of Audit Finding Moderate 2 Action Owner Assistant Corporate Controller Due Date Q2, Minutes of Significant FSCP Meetings Documented minutes of FSCP-related meetings is identified within the financial statement closing process guidelines as a key control. They serve as a corporate record for demonstrating management oversight within this process. They also help to track and monitor the issues identified, actions agreed and the persons responsible for clearing the issues. Financial Statement Review (FSR) meetings are held every month to discuss the monthly financial statements and to analyse the variances from the previous period. The meeting is attended by the CFO, Corporate Controller, Assistant Corporate Controller, Director Corporate Accounting and the accounting team managers. During the audit we found that FSR meetings are held on a consistent basis but minutes of this meeting are not being documented. Management has agreed to ensure FSR meeting minutes are documented. Issues raised in the meetings will be stated in the minutes with target clearance dates and the responsible persons. Minutes will be reviewed and signed off by the Assistant Corporate Controller. Meetings between the business line managers and the members of the different accounting teams within corporate finance are held regularly to discuss any changes to the business and their impact on the financial statements. Minutes of these meetings are not being documented. In the absence of these minutes, it is not possible to identify the items discussed and how their potential impacts on the financial statements were analyzed. Management has agreed to ensure that minutes of these meetings are documented and reviewed by the relevant accounting team managers. Rating of Audit Finding Moderate 2 Action Owner Assistant Corporate Controller and Director, Corporate Accounting Due Date Q4, 2014 Financial Statement Closing Process August 26,

5 Conclusion The audit findings and recommendations have been communicated to and agreed by management, who has developed action plans that are scheduled for implementation no later than Q We would like to thank management for their support throughout the audit. Financial Statement Closing Process August 26,