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Audit Committees/ Audit Boards/ External Audit
Presented by John Martin EUROCONTROL
9 June 2009
see general disclaimer – next slide
Benchmarking exercise – Financial Governance
Questionnaire for International Organisations
Presenter gives no guarantee of the content of the answers and hence this presentation
Questionnaire created and sent by the Internal Audit of EUROCONTROL to Controlling Functions of Int’l. Organisations – Also Coordinated with an Internal Audit Network Group questionnaire – based on answers provided
As a result, I kept the Organisations anonymous This presentation shows the synthesis of the data
from 23 Organisations
Content of Presentation
Audit Committee Audit Boards External Audit Accounting Standards Discharge
Participants of the Benchmarking
23 Organisations:
7 EU: EC, ECA, ECB, ETF, S-JU, EIB, European Ombudsman
9 Other “European” Intergovernmental:CERN, CoE, CEB, EPO, EIB, ESA, OSCE,
EUROCONTROL, ESO
7 World-wide Orgs: UNOPS, Interpol, WIPO, WTO, ICRC, IUCN, OECD
What do I consider to be an Audit Committee?
RIAS defines the purpose of an Audit Committee: RIAS = Representatives of Internal Audit Services in the U.N
"The purpose of an Audit Committee -as an independent advisory expert body - is primarily to assist the governing body, and the executive head of the < U.N.> entity and other multilateral institution as appropriate, in fulfilling their oversight and governance responsibilities, including the effectiveness of internal controls, risk management and governance processes. The audit committee must add value and must strengthen accountability and governance functions; not duplicate them."
UK Government – HM Treasury Guidance- 5 GOOD PRACTICE PRINCIPLES
AUDIT COMMITTEE ROLE - Support the Governing Board (& Accounting Officer)
MEMBERSHIP Independent & Objective Good Understanding of objectives/priorities of the Organisation
SKILLS – Committee should corporately own an appropriate skills mix to allow it to carry out its function
SCOPE OF WORK – should be defined in Terms of Reference Particular engagement with work of Int Aud, Ext Aud, Fin Reptg
COMMUNICATION – Effective Comms with Board, Head of Int Aud, Ext Aud, and other stakeholders
Do you have an Audit Committee ? (Y, N, unclear)
YES: 10 NO: 10
Called an Audit Committee: (but seemingly with the functions of an Audit Board): 2
One response said their Finance Committee filled those roles: 1
10 Audit Committees in These Organisations – A 21st Century Phenomonon
0
2
4
6
8
10
12
2000 2003 2004 2005 2006 2007 2008 2009
Number
Cum
10 out of 23 Organisations surveyed have an Audit Committee or Audit Progress Committee
At least 3 more currently considering or taking stepsSo by 2010 the majority of the 23 will have them
10 Audit Committees – Who does AC report to?
Out of 10 5 report to the Governing
Body /Council 1 reports to the Finance
Committee & Governing Body
2 report to DG/Exec Director
2 report to College of Commisioners/Court member
0
1
2
3
4
5
Gvng
Body
Fin Ctee DG Court
10 Audit Committees – Role Internal Audit
Out of 10, role re. IA 4 Supervisory 3 provide Advice 3 Review IA
0
1
2
3
4
Supervise Advise Review
10 Audit Committees - External Audit & RM
Role re External Audit - out of 10 2 Supervisory 2 advise concerning Ext Aud 2 Review Ext Aud 4 have no mandate in regard to
Ext Aud
Risk Management (RM) – out of 10 2 Advise in regard to Risk
Management 8 have no mandate in regard to
RM
0
1
2
3
4
Sup Adv Rvw No mandate
RM role
No RM Role
10 Audit Committees - Membership
Conclusion: …………it varies
Number of members Min: 3; Max 9; Average 5,6
Internal : External (1:3);(0:4);(3:1); (0:3); (7:2); (3:1); (0:9); (0:4);(1:6); (0:9)
0
2
4
6
8
10
External
Internal
10 Audit Committees – Members from Gvng Body ?
How many members from the Council / Governing Body Out of the 10 Audit Committees
7 had no Council members (or equivalent) 1 had one Council member 1 had 3 Council members (/ National Representatives) 1 had 6 Council members
How many have an Audit Board or Court ?
Audit Board/Court Yes 11 (5 EU bodies by ECA)Yes (but called an Audit Ctee) 2
13No 10Total 23
They deal with or the External Audit
External Audit of the accounts– who does it ?
For 5 EU Institutions – the ECA does the audit (of course except the ECA itself) – 5 out of 23 Organisations
External Audit done by contract with a National Supreme Audit Institutes for - 8 of 23 (some pay but one or two don’t)
Ext Audit done by Firms of auditors (or assistants or Statutory Auditor) for - 8 out of 23
(fees, where reported, between €50k and €500k)-Most < € 200k
Rotation - Many have a requirement in their Regs- but all who answered this question – did it in practice- (except the EU institutions – bound to the ECA)
Accounting Standards – getting there
IPSAS: 12 (or nearly e.g. EU bodies)
IFRS: 5
Own/Fin Regs: 6
Total 23
Discharge
Out of 23 organisations: 19 had a process of Discharge 4 didn’t (just approval of the audited statements)
What happens if discharge not given? Out of 19 :
13 were not sure !!! 1 said the Board would resign 5 said there would be / a requirement for re-presentation of the
financial statements/ other limited measures/ new budget approval restricted
CONCLUSION – Is this process out dated ?
Benchmarking exercise – Financial Governance CONCLUSIONS
3 fundamental conclusions on Financial Governance (1) Trend to form an Audit Committee in last 9 years
Varied organisation, process and mandates
(2) Naming is inconsistent (Audit Board / Audit Committee/ Audit progress Committee)
(3) More organisations moving to Generally Accepted Accounting Standards
Thank you – feel free to contact me
