- 1. Internal Audit Support of Audit Committees What Works Best
The Institute of Internal Auditors Webcast Series on Sarbanes-Oxley
Session #5 September 9, 2003
2. The IIA Webcast Moderator Jim Key, CIA Managing Partner
Shenandoah Group, L.L.P 3. Disclaimer
- The views expressed in this webcastare solely those of the
panelists and moderators and do not necessarily reflect the views
or policies of The Institute of Internal Auditors or its directors,
officers, employees, and members.
4. Series 2:Emerging Trends and Best Practices in Implementing
SOA
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- May 21 -Section 404 Readiness Review: How to document your
system of internal control . (Archived)
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- June 10 -Helping your audit committee implement complaint
handling.(Archived)
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- July 8 -Leveraging the COSO framework to meet Section 404
requirements (Archived)
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- August 12 -Project Administration Setting and revising
priorities in the wake of the Final 404 Rules (Archived)
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- September 9 -Internal Audit support of Audit Committees What
works best
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- September 30 -The Road Ahead Meeting the challenges in
complying with The Sarbanes-Oxley Act
5. Webcast Series on SOA
- Fostering Compliance with SOA:Internal Auditors Role
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- Four sessions archived on IIAs website and available on CD
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- Originally aired January 28 April 15, 2003
6. Agenda
- 1:00Introductions and Overview
- 1:10Managing the Auditors Janice Wilkins
- 1:20Managing the Audit Committee Schedule -Norman Marks
- 1:30Educating the Audit Committee Jerry Ferenczy
- 1:45Questions and Answers - Panel
7. Managing the Auditors - How Internal Audit Supports the Audit
CommitteeJanice Wilkins Vice President Director, Internal Audit
Intel Corporation 8. Supporting the Audit Committee Board of
Directors Audit Committee Compliance with Applicable Laws &
Regs Internal Audit External Audit Management Reliability of
Financial Reporting Effectiveness & Efficiency of Operations
Oversight of Financial Reporting Process & Internal Control
9. Competency Assessment
- Independence and objectivity
- Client and industry knowledge
- Proactive communications/responsiveness
- Domestic and international staff quality
10. Services and Fees
- Regulatory compliance verification
- Non-financial audit pre-approvals
- EA budget coordination and reporting
- IA budget and staffing reviews
- EA engagement team employment
11. Audits and Reporting
- Enterprise, business unit and financial reporting risk
assessments
- Controls evaluation and opinion
- EA and IA audit coordination
- Management Letter Comments coordination
- Anonymous reporting administration
12. Audit Committee Operations
- AC charter development and review
- Facilitate pre-earnings calls
- Annual AC self-assessment
- Financial expert & independence assessments
- D&O questionnaires review
- Annual EA and IA assessments
13. Regulatory Compliance
- Regulatory and emerging issues updates
- Ethics and compliance oversight and evaluation
14. Agenda
- 1:00Introductions and Overview
- 1:10Managing the Auditors Janice Wilkins
- 1:20Managing the Audit Committee Schedule -Norman Marks
- 1:30Educating the Audit Committee Jerry Ferenczy
- 1:45Questions and Answers - Panel
15. Managing the Audit Committee Schedule Norman Marks Vice
President, Internal Audit Solectron Corporation 16. Outline
- Demands on the Audit Committees time
- Demands on managements time
17. Demands on the A/C time
- Per Korn-Ferry, A/C time doubled
- Sarbanes-Oxley, SEC, Listing Standards
- Courts expect best practices
18. Demands on the A/C time
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- EA and IA (Internal Controls)
19. Demands on Management
- Preparation before & presentations at every meeting
- Actions after/between meetings
- Board focus on governance vs. management
20. The Role of the CAE
- Advisor to Audit Committee
- Help identify Best Practices
- Often manage Audit Committee agenda
- Often prepare Audit Committee materials
21. Tips and Techniques
- Delete unnecessary charter tasks
- Audit Committee checklist from charter
- Lay out agendas for full year
- Pre-reading materials and expectations
- Reviews, etc. through e-mail
- Information between meetings
22. Delete Tasks
- Are all Committee activities necessary?
- Focus on governance vs. management
23. Committee Checklist March January Charter Step Review and
reassess the adequacy of [the Committees] charter at least
annually. X Review the Companys annual audited financial statements
[i.e., those included on Form 10-K] prior to filing or
distribution.Review should include discussion with management and
independent auditors of significant issues regarding accounting
principles, estimates, practices, and judgments. X 24. Lay out
year
- Meetings with a theme (e.g., year-end)
- Move meetings to avoid calls (e.g., to coincide with 10-Q
review)
- Long meetings once a year (e.g., for training)
25. Pre-reading materials
- Provide hard and soft copy well in advance
- Members expected to read before meeting
- Questions to CAE, etc. by e-mail before meeting
26. Reviews prior to meeting
- Draft 10-Q, proxy, etc. sent to members early
- Questions posed and answered via e-mail
- At meeting, limit to confirmation that questions answered
27. Between meetings
- Dont wait to share important information and handle through
e-mail (e.g., audit reports)
- Stay in touch and talk to members
28. Conclusions
- The Audit Committees load considerably increased
- Members do not want to limit their activities and spend double
the time
- They, management, and CAE can make meetings efficient with
discipline and imagination
29. Agenda
- 1:00Introductions and Overview
- 1:10Managing the Auditors Janice Wilkins
- 1:20Managing the Audit Committee Schedule -Norman Marks
- 1:30Educating the Audit Committee Jerry Ferenczy
- 1:45Questions and Answers - Panel
30. Educating theAudit Committee Jerry Ferenczy, CPA, CISA, CPCU
31. Audit Committees the Past
- Met 3.3 times a year for less than 1 hour
- 1/3 did not regularly meet with IAD; 10% never met with
them
- Had no required pre-existing skill sets; most committee members
had no formal training or education plan
32. Audit Committees the Present
- Meet average of 6 times a year; some as many as 16
- Are required to review IAD and risk management; must perform
self evaluations
- Must have some degree of financial literacy
33. The Effect
- Boards must look at more stuff in more detail than ever
before
- Boards typically have two different types of members
- Each type has different perspectives and needs
- CAE must be prepared for both types
34. Suggestion # 1
- Know Your Committee Members
- WHERE WEVE BEEN HAS A LOT TO DO WITH WHERE WE ARE GOING.
35. Suggestion # 2
- These facts, if true, suggest that the directorsconsciously and
intentionally disregarded their responsibilities . . .
- They simply did not care if they were making a material
decision with adequate information.
36. Suggestion #3
- "You got to be careful if you don't know where you're going,
because you might not get there."
37. Conclusion
- Those who fail to learn from the past are doomed to repeat
it.
38. Webcast Summary
- Internal Audit must support the Audit Committee in its new role
as manager of the external auditors
- Assisting the Audit Committee in managing its schedule is now
critical with impact of Sarbanes Oxley
- Educating the Audit Committee to serve its broadened role is
essential
39. Thank you for your participation! Dont miss our next Webcast
series beginning September 30, 2003