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President's message

April 2015

Why Integrity and Ethics are Inextricably Linked with Internal Audit
Between the 23rd and 29th of March, Singapore observed a period of national mourning for the late Mr Lee Kuan Yew, Singapore’s first Prime Minister, a statesman pivotal to the founding of modern Singapore and the success she has enjoyed economically in the last 50 years.
 
Local media dedicated significant amounts of airtime televising Mr Lee’s past speeches and interviews. In a clip titled: “Lee Kuan Yew - In His Own Words: Governance”, Mr Lee underscored the importance of ensuring Singapore’s success through capable and competent leadership, in a corruption-free environment. He emphasized the need for meritocracy and spoke at length about the role that audits play in ensuring accountability and transparency, allowing the government and organisations alike to stay corruption-free and focus on the betterment for the people and stakeholders they serve.
 
Internal auditing being an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. As an independent body, IA embraces the highest ethical code, to never yield to pressures to bend rules in order to achieve greater operational convenience. Integrity being one of the four principles that form IIA’s Code of Ethics; it is imperative that Internal Auditors possess a high level of trust and integrity to enable them to be strong advocates of ethical conduct and have the competence and capacity to evaluate the compliance of  ethical standards by the staff. To attain an anti- fraud and corrupt free environment to protect a company’s reputation, IA must evaluate whether an organisation’s policies and procedures support ethical operations and whether the existence of these processes mitigate any threats to the organisation’s integrity.  
 
Yours Sincerely
Eric Lim
President

 

March 2015

IIA Singapore is first strategic partner for the COSO Academy

The Institute of Internal Auditors Singapore (IIA Singapore) is proud to be the first strategic partner of the Protiviti-SAC COSO Academy, a collaboration that was inked at the start of the Lunar New Year in February, underscoring the significant role that internal auditors play in evaluating and monitoring corporate governance and risk frameworks.

The COSO Academy offers senior management and practitioners access to insights and tools to better understand how the COSO Frameworks can work for their organisations. These Frameworks are internationallyrecognized structure, integrating both internal control and risk management and are relevant for all businesses, including government agencies and charities. Internal auditors have always been involved in evaluating the effectiveness of control systems, working with all levels within their respective organizations including management and board. Through IIA Singapore’s strategic partnership with the COSO Academy, we hope to raise awareness of the COSO Frameworks as a best practice and help the internal audit function add even greater value to organizations.

IIA Singapore’s maiden effort as a COSO Academy strategic partner is the COSO Awareness Survey, launching this month, with the purpose of measuring awareness levels and the adoption of the COSO Frameworks among organisations in Singapore. We look forward to your support and participation as your views will give us important insight into how we can better promote COSO Frameworks to the public and private sectors in Singapore. With cyber risk and fraud becoming increasingly big concerns for organisations across the globe, a reliable infrastructure to support good corporate governance has never been more important. As Internal Audit practitioners, the  journey to educating oneself thoroughly on the COSO Frameworks and how to adopt them in your organisation would be the ideal place to start.

Also, look out for more courses and workshops that the IIA Academy will be incorporating in our training calendar on COSO Frameworks in the coming months!

Yours Sincerely
Eric Lim
President

February 2015

Continuous Professional Education
The Institute of Internal Auditors Singapore (IIA Singapore) is dedicated to the advancement and development of the internal audit profession and we continually seek to develop new seminars and conferences, addressing relevant, trending and updated topics.  For the first half of 2015, we have two important events lined up; the Public Sector Internal Audit Conference on 9, 10 April and the Asia Leadership Internal Audit Programme between 25 and 29 May.
 
As we transit into an era of greater complexity and volatility, it is imperative for Internal Auditors to raise the bar of  their capability and competency to contribute to organisational transformation towards high performance. The Asia Internal Audit Leadership Programme is specially tailored for aspiring and senior Internal Audit practitioners, keen on refining and enhancing their leadership skills to provide thought leadership. This intensive 5-day program is facilitated by two experts from the Wharton School and participants will also meet and hear from invited prominent practitioners to share their thoughts and experiences in the Programme. Jointly launched by IIA Singapore and the Singapore Accountancy Commission (SAC), it is positioned as the first programme in Asia to formally groom Internal Audit leaders. It is designed by TMS Academy the integrated leadership development arm of Temasek Management Services Group, a wholly-owned subsidiary of Temasek Holdings.
 
The second important event on the calendar is the annual Public Sector Internal Audit Conference.  The theme this year is “Unlocking the value of internal audit – For an efficient and effective government”. Given the vital role played by internal audit in strengthening corporate governance, internal controls, risk management and value-for-money initiatives in the public sector, internal audit is also expected to be mindful of  external threats  and  internal weaknesses  facing the  organization. The conference will share  ways to unlock the IA value,  insights and market practices to overcome emerging issues and challenges that the organisations may face.
 
As we continuously strive to provide quality education, we welcome members’ inputs to help us in designing  programs that meet your requirements so that you can excel in your work and in your career!
 
Yours Sincerely
Eric Lim
President

January 2015

2014 Reflections For Internal Auditors
We had an eventful year in 2014! Major happenings involving changes in political leadership, international conflicts, epidemic outbreaks, natural disasters and cyber-attacks unfolded at relentless speed, presenting opportunities to some on the one hand and numerous threats to others on the other hand.
 
How did internal auditors fit into this puzzle? We may be special. Do we view threats as opportunities for our work? Opportunities for us to identify risks affecting the organisations we work with? Opportunities to identify processes for consideration and to incorporate them into our audit universe and the audit work plan?  The intent and priority is to always safeguard the interest of these organisations; to provide accountability, comfort and assurance to key stakeholders.
 
On this note, I wish you all a purposeful and fruitful year in 2015.
Thank you. 
 
Yours Sincerely
Eric Lim
President

December 2014

Taking Stock

As the calendar year 2014 is drawing to a close, many would start to take stock. What have I accomplished in my work and what else could I have done to make the year a fulfilling one? The answer could be there is no end to self challenge ourselves to do more; and do better to have a greater impact on our organisations.  

How could you do better? One way is to seek a path of continuous personal development and continuous training. We need to take stock of our skill set and identify gaps. We can raise the bar by enhancing and sharpening our skills and re-skilling to move in tandem or even ahead of the changing times and global environment. Doing so, we will keep ourselves effective and relevant to support our stakeholders responsibly; and according to what the market demands from IA.  

IIA Singapore in the coming year will be active in providing market driven training courses to cater the needs of our members. One important hall mark programme for leadership will be launched in 2015. Watch out for the news!

Yours Sincerely
Eric Lim
President

November 2014

Demonstrate IAs' Uniqueness

Internal Auditing is a unique profession. Hence, it should be viewed as a unique value adder. When do we demonstrate IAs’ uniqueness? One best time should be when we conduct auditing. IAs must be able to provide unique insights from our observations during auditing which are unfathomable to the process owners and management. Equally important, the solutions that come with it must be unique too. This may be easier said than done but this should be something IAs should strive for. Food for thought!

Yours Sincerely
Eric Lim
President

October 2014

Productivity is the key to competitiveness
From 2008 to 2013, Singapore’s GDP grew at an average annual rate of 6.8% whilst the labour workforce grew at 3.4% with a majority of negative productivity growth during the same period. 
 
Being an open economy and without natural resources, Singapore needs to be competitive otherwise it finds it difficult to export goods and services competitively as well as attract investments to grow its economy.  Hence, productivity is crucial to maintain our competiveness. Acknowledging its importance, the Singapore Budget 2010 set the target of 2% - 3% productivity growth over the next decade to drive 60% of future Gross Domestic Product growth.
 
Generally, productivity is a measure of how efficiently and effectively a business or an economy uses inputs such as labour and capital to produce goods and services. It is not only about controlling costs in the businesses but “doing things right” and “doing the right things” and doing them well to achieve maximum efficiency and value.
 
Where and what can the internal auditors offer in the organisations they work for. Let us re-examine our internal auditing definition, i.e. “…it is an independent, objective assurance and consulting activity designed to add value and improve an organisations’ operations.” It is without much doubt that IAs do play a greater role in the organisations to help management enhance productivity. As a matter of fact, our Annual Work Plans would have include projects relating to operational auditing, value for money audit, performance audit or 3 Es. Of course, we should acknowledge that the business owners too play a role in enhancing productivity too. Should IAs re-think and think big, and work together with the key stakeholders on the things that matters to the organisations so as to be seen as a valued player to achieving the overall goal of the organisations?
 
Yours Sincerely
Eric Lim
President

 

September 2014

Job Rotation

Most top organisations have HR policies that contribute to strong Corporate Governance; one of which is the job rotation scheme. This policy is with good intent. Some use it to groom staff for higher appointment while others use it to develop their staff through enhancing their skill set, knowledge and experience to better contribute in their jobs. However, there is limitation among others on job rotation as not all staff can be rotated to another job or can be easily rotated due to the nature of the work. Where a company practices job rotation, cost may be a concern, as it comes with a learning curve that consumes time and efforts and to a certain extent, operational disruption to the organisation. Notwithstanding this, rotation would more likely to bring net positive effect if it is properly planned and managed.    

As internal auditors, we may view job rotation as part of HR policy to contribute to corporate governance. This is where staff manning new work area has its merits. Being new, he will likely to go through the policies, procedures and systems and reports so as to understand the operations.  Armed with his prior experience, he may be able to recommend changes to make the operation more robust. This staff rotation is like management directing its own “auditor” to self-audit its activities. While in the scheme, the staff will apart from gaining fresh perspective may bring positive outcome where he may spot pleasant and unpleasant things such as potential or real control weaknesses.  With  such schemes, most incumbents will buck up to ensure that their systems and activities perform efficiently and effectively with no unusual activities as most would not want a new comer to provide negative outcomes but positive outcomes. The new comers even so would be motivated to do well to exhibit their contributions.

The view is that the job rotation scheme acts as a preventive mechanism to deter staff from committing unacceptable activities and motivate them to perform well; as well as a detective mechanism to uncover unacceptable behaviour and undesirable activities. We have seen a number of cases where staff under job rotation scheme prevented and uncovered wrong doings. Of course, there are other mechanisms to do this as well.  Internal Auditors may value job rotation as one possible form of recommendation in enhancing the organisational governance framework.

Yours Sincerely
Eric Lim
President

August 2014

Reporting Line of Chief Audit Executive?
Who CAEs report to varies from companies to companies. We have seen that some CAEs report to ACs, some to CEOs, some to COOs, some to CFOs, CTOs and so on.
 
Why the variations?  There could be multiple of "theories".  Some organisations value the objectivity and independence of CAEs, thus making them report to the ACs. Some decide to let CAEs report to CEOs so that the latter will be abreast of what goes on in the organisations. There are others which may not see the importance of positioning the CAEs appropriately in the organisation, thus making them report to someone like COO, CFO, and CIO from the C-suite.
 
There are some who asked, what should be the ideal reporting line for CAEs? 
  
The question is answered in the International Professional Practices Framework (IPPF), the global authoritative guidance on internal audit profession.  The IPPF Standards requires that the IA activity must be independent. So, under Standards 1110, the CAE must report to a level within the organisation that allows the IA activity to fulfill its responsibilities. The CAE must confirm to the board, at least annually, the organisational independence of the IA activity.
 
With this, to achieve organizational independence, the IPPF Practice Advisory 1110-1 advises dual reporting where the CAE reports functionally to the AC and administratively to the organisation’s CEO. Reporting functionally to AC/Board would enable the CAE to help AC in its oversight role and providing independent and objective assurance that governance, risk and control processes are functioning effectively. Noting that CAE is still part of the organisation, thus his administrative relationship with the CEO will enable him to execute his IA functions effectively to meet the mission of the organisation.  
 
It is important to note that the Principle 13 of the Singapore Code of Corporate Governance (the “Code”) states that the company should establish an IA function that reports functionally to the AC Chairman and reports administratively to the CEO, which adopt the guidance of IPPF.  Although compliance to the Code under the purview of SGX and the MAS is not a must, listed companies are required under the SGX Listing Rules to give explanations for deviations from the Code in their annual reports.
 
To check the robustness of the CAE reporting line, we should ask whether the relationship provide independence and objectivity in the IA work. If it does not, as conflict of interest exists, then this relationship needs to be reviewed otherwise it may jeopardise the interest of the organization; and the stakeholders may suffer because of lack of independence and objectivity.      
 
The solution is for AC to work with management to come up with a resolution that addresses both the management’s concerns and the AC’s need for an independent assessment of internal controls. Furthermore, the AC could make assessments on whether the IA function that reports direct to AC would be better supported if it reports administratively to the CEO.
 
To conclude, all parties should use the IPPF as a guide in coming with the reporting structure that provides the best governance for the organisations.
 
Yours Sincerely
Eric Lim
President

 

July 2014

Building Capability and Capacity
Internal auditing services are growing in demand in organisations today as organisations are facing numerous challenges on many fronts; such as increasingly complex business environment, evolving regulations and organizational changes. Demands may also arise from regulatory authorities, board, CEO/senior management, line managers and external auditor. 
 
As it is CAE’s responsibility to ensure that IA resources are appropriate, sufficient and effective, he too has the responsibility to ensure its capability and capacity are ready to meet the stakeholders' demand and expectations. However, what could CAE do if IA’s capability or capacity is inadequate or both are inadequate? Generally, apart from adding manpower and tools, out-sourcing, co-sourcing or in sourcing would be one or a combination of these actions taken. The resourcing of IA activity should be planned ahead during the annual workplan stage as additional budget would be needed if the audit activities are to be outsourced and/or when internal resources such as manpower and facilities are required from other departments. However, the resourcing could be quite challenging for those IAs which may not have the budgets or/and avenues to build their capability and capacity and even so if they lack support from their boards/managements .  
 
Hence, it is always a great challenge for CAEs is to build up the capability and capacity of their internal audit department in anticipation of the demand.
 
Yours Sincerely
Eric Lim
President

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