u003cpu003eCorporate governance in Mauritius has recently been issued a series of challenges that could have major implications for the internal audit profession. Many, although not all, of these have been in the financial services sector. We only need to look at a few international cases to understand the full impact of such events;u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; 2008 u0026ndash; Bernard Madoff Scandal u0026ndash; tricked investors out of $ 65 billion through the largest Ponzi scheme ever u0026ndash; 150 years in prison for the CEO and the finance director.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; 2002 u0026ndash; Worldcom Scandal u0026ndash; inflated assets by $ 11 billion u0026ndash; CEO sentenced to 25 years in prison. CFO fired and company filed for bankruptcy.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; 2009 u0026ndash; Satyam Scandal u0026ndash; falsely boosting revenue by $1.5 billion u0026ndash; CEO and brother sentenced to life imprisonment.u003c/pu003eu003cpu003eWhat these, and other examples, have in common is that internal audit did not appear to be positioned, tasked or resourced properly to act as the effective eyes and ears of the board as the third line of defence in managing organisational risk.u003c/pu003eu003cpu003eOur experience in BDO has allowed us to develop a framework for internal audit and this offers boards ten essential actions to ensure companies maximise the value they get from internal audit and gain maximum protection and assurance from its activities. While this detailed guidance is produced primarily for private-sector organisations, boards in the public sector may also find it of value. In summary the ten actions areu003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Evaluate the business case for an internal audit functionu003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Assess and approve the internal audit charter (terms of reference) and review regularly.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Ensure a close working relationship with the head of internal audit, promoting effective formal and informal communication.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Assess the resourcing of the internal audit function.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Monitor the quality of internal audit work, both in-house and external.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Evaluate, approve and regularly review the risk-based annual internal audit plan.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Oversee the relationship between internal audit and centralised risk monitoring.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Ensure the collective assurance roles of internal audit, other internal assurance providers and external audit, are coordinated and optimised.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Assess internal audit findings and the breadth and depth of internal audit reports.u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Monitor management implementation of internal audit recommendations.u003c/pu003eu003cpu003eThe internal audit profession in Mauritius is at a crossroad and this is mainly due to the fact that not all Boards are as welcoming of the idea of giving internal audit a proverbial seat at the table. This is also a reflection of a lack of risk management culture within companies. It remains a u0026ldquo;nice to haveu0026rdquo; function, a box ticking exercise to comply with Code of Corporate Governance, as opposed to a u0026ldquo;must haveu0026rdquo; function. In fact, many Boards in Mauritius still believe that internal audit is a finance director u0026#39;problemu0026#39; and even more surprisingly, the same sentiment runs amongst the audit committee members. A plausible explanation behind this perception may lie in the fact that the board is not being kept abreast of the latest developments in the profession. This is further exacerbated by a lack of defined mechanism in place to test the audit committee effectiveness on a periodic basis.u003c/pu003eu003cpu003eThe vast majority of Boards in Mauritius still views Internal Audit as the u0026lsquo;policemanu0026rsquo; of the organisation; worse, some even confuses them with forensic auditors. In contrast, multinationals operating in developed markets have a different business approach to internal audit. They are generally viewed as professionals who will work with the organisationu0026rsquo;s major functional units such as sales, marketing, finance, procurement, HR etc. to generate value to its various stakeholders.u003c/pu003eu003cpu003eA confluence of increased regulation, intense focus on corruption and heightened scrutiny of risk management has changed the role of the internal auditor and I believe that as Internal Auditors in Mauritius, we have a great challenge to push executive management and the board to respond to these changes. From evaluating deficiencies in the financial controls to improving business operations efficiency, the Internal Audit profession has evolved to a great extent to meet the expanding needs of management and other stakeholders.u003c/pu003eu003cpu003eA key ingredient to a value added internal audit function is finding auditors with the right skills and capacity to deliver a modern approach and address organizational performance issues. As the profession continues to evolve, we are seeing a transformation in the skills and attributes required for professional success. Technical skills remain absolutely necessary, but they are no longer sufficient on their own. Of the five most sought-after internal auditor skills by global recruiters, only one covers a technical area:u003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Analytical and critical thinkingu003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Communication skillsu003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Leadership skillsu003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Business acumenu003c/pu003eu003cp style=margin-left:8.5pt;\u003eu0026bull;u0026nbsp; Risk managementu003c/pu003eu003cpu003eAll too often in Mauritius, the internal audit function is pitched as a commodity rather than as a service; be it an in-house, a co-sourced or an outsourced function, the Board needs to demand more from their auditors.u003c/pu003e
Corporate governance: better informing the board about internal audit
