The-Accountant-Sep-Oct-2017-Final

Governance
• Promoting appropriate ethics and
values within the organizations
• Ensuring effective organizational
performance management and
accountability
• Effective communicating risk and
control information to appropriate areas
of the organization.
• Effectively, coordinating the activities
of the communicating information
among the board, external and internal
auditors and management.
Remember internal audit is more
than an enterprise- wide engine of
assurance, as critical as it is, it can
also be used as a catalyst for creating
value for your business. Internal audit
can help in shaping new governance
and risk paradigm-anticipating issues,
increasing your effectiveness, eliminating
duplication and identifying areas of
potential performance improvement.
Given the widespread call for greater
board accountability and transparency
– internal audit
supports the BoD
and its committees
by independently
assessing the
effectiveness of an
organization’s system
of internal control as
well as compliance
with statutory, legal
and regulatory
requirements. The
internal auditor of an
organization, should
at least annually carry
out an assessment
of the overall
effectiveness of the
governance, risk and
control frameworks
of the organization.
It’s upon the internal
audit with the help of
audit committee to set
up the right priorities.
It is therefore
recommended that,
internal audit adopts
a risk based approach,
focusing on the high
risk areas, going
down the ladder as
a much as possible
keeping in mind that
a failure by internal
audit is a failure to
the board and finally may pose a high risk
to the organization.
According to Institute of Internal
Auditors, standard No.2060 on internal
audit reporting to senior management
and the board requires that Chief
Audit Executive must report to senior
management and the board matters
relating to significant risk exposures,
and control issues, including fraud
risk, governance issues and other
matters needed or requested by senior
management and the board.
The internal auditor of a given
organization should ensure that the main
principles defined in the UK corporate
governance code are adhered to namely;
Leadership- Ensure that every company
is headed by the right people with
right minds and with clear definition
of responsibilities to ensure balance of
power and authority.
Effectiveness- Ensure that the board
and its team have an appropriate balance
Management
Board of directors
Audit committee
Internal and external auditors
Regulators/associations
ORGANIZATIONAL GOVERNANCE
Beneficiaries of corporate
governance
Stockholders
Investors
Lenders
Suppliers
Charitable contributors
The broader public
Monitoring Risk
Assurance
regarding
controls
of skills, experience, independence and
knowledge of the company to enable
them to discharge their respective duties
and responsibilities.
Accountability-The board should
maintain a sound risk management
process and internal control systems.
The board should establish formal and
transparent arrangements for considering
how they should apply the corporate
reporting and risk management and
internal control principles and for
maintaining an appropriate relationship
with company’s auditor.
Remuneration- Levels of
remuneration should be sufficient to
attract, retain and motivate directors of
the quality required to run the company
successfully while avoiding to pay more
than necessary for this purpose.
Relations with the shareholders-The
board should encourage an annual general
meeting to communicate with investors
and to encourage their participation.
Achievement of
organizational
goals and
preservation of
value
Accountable to
stakeholders
for effective
stewardship
Source: The Institute of Internal Auditors Research Foundation.
As indicated by Sarens and De Beelde (2006), internal auditors are currently expected to make things
happen rather than waiting to respond to it as they are seen too be enablers of change and a source of
organizational strength in terms of risk reduction, cost cutting and value creation mostly through offering
quality advisory services. A research conducted in Nairobi stock exchange indicated that 84% of the
respondents strongly agreed that internal audit unit has an influence on governance, Odoyo and Omwono
(2014). Therefore, from above it can be concluded that internal audit has a role play in influencing
corporate governance.
mwitajully@yahoo.com
26 september - october 2017