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- 1. Accountability and Practices ofTodays Audit Committee in EnhancingGood Corporate GovernanceBest Practices forCorporate Governance & Board Effectiveness31 August -1 September 2009 swisstel Nai Lert Park Bangkok By Pairat Srivilairit, CIA, CISA, CBA, CCSA, CFSA, CISSP, CFETuesday, 1 September 2009, 13.15 14.15 hrs Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected]
2. About Speaker Mr Pairat Srivilairit received a bachelor of engineering from ChulalongkornUniversity and a MBA from Thammasat University. He is a certified internalauditor (CIA), certified information systems auditor (CISA), certified bankauditor (CBA), holder of certification in control self-assessment (CCSA), certified financial serviceauditor (CFSA), certified information systems security professional (CISSP), and a certified fraudexaminer (CFE). He is chairman of the Bank and Financial Institution Internal Auditors Club (BFIA) and past directorof ISACA Bangkok chapter. He is also a member of The Institute of Internal Auditors (IIA), TheAssociation of Certified Fraud Examiners (ACFE), The Information Systems Audit and ControlAssociation (ISACA), The International Information Systems Security Certification Consortium(ISC) and The Institute of Internal Auditors of Thailand (IIAT). He is a known lecturer on operational auditing and information system auditing courses at IIAT andISACA Bangkok Chapter. He is also a special lecturer of the IIAs Internal Auditing EducationPartnership Program (IAEP) at Chulalongkorn University, and served as a member of the IIATseditors committee in publishing the Thai version of IIA standards, and the book on internal auditingprocedure which was published with the support from the Stock Exchange of Thailand (SET). Healso represented IIAT speaking to students at several universities to disseminate the internalauditing profession. Mr Pairat Srivilairit is associated with finance and banking industry for over 18 years with richexperiences in the area of management consulting, planning, research, investment,operation and audit. He is now with TISCO Bank Public Company Limited as head ofinternal audit and secretary to the audit committee.Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate GovernancePairat Srivilairit [email protected] 3. OutlineAccountability and Practices of Todays AuditCommittee in Enhancing Good CorporateGovernance:(60 min) Latest development on Audit Committee mandates Critical roles & responsibilities at the present Recommended tools & mechanism for Committee toeffectively discharge their roles and responsibilities Exploring how IA can excellently work with Committee Effectiveness & efficiency of Internal Audit functions SummaryAccountability and Practices of Todays Audit Committee in Enhancing Good Corporate GovernancePairat Srivilairit [email protected] 4. Boards Roles in Governance Governance is the system by which organizations aredirected and controlled. It includes the rules andprocedures for making decisions on corporate affairs toensure success while maintaining the right balance withthe stakeholders interest. Boards Dual Roles in corporate governance Advisor to management Fiduciary to shareholders Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 5. The Bad News Capital markets expect more from Audit Committeeoversight role in every areas that demand transparency. Oversee process that produces reliable, transparentand objective financial information Ensure the company has effective internal controls Retain and compensate external auditors Oversee risk management Compliance with laws and regulations affecting thecompany Oversight of management. Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 6. Financial Accuracy Understand financial statements / accounting policies Assess quality of earnings, not just reliability Healthy skepticism / ask probing questions Comfortable with treatment of unusual / complex issues Understand significant changes / auditors concerns Consider risk of fraud it is never zero Revenue recognition Provisions Expense classification Areas of judgement Accounting for business Suspense / Clearing combinations accounts Review adequacy and consistency of disclosuresAccountability and Practices of Todays Audit Committee in Enhancing Good Corporate GovernancePairat Srivilairit [email protected] 7. Internal Control Assess if management provide enough tone at the top Ensure staff have capabilities Strong culture of integrity do the right thing Understand if audit plans address high-risk areas Management override Poor culture Outside service providers Recurring control weaknesses Information technology Payment systems Mergers and acquisitions Segregation of duties Understand control weaknesses, correction plan,and their impacts on financial reporting Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 8. External Auditor Auditors should report directly to the committee Audit Committees have a role in Selecting, or reappointing, external auditors Evaluating auditors performance Ensuring auditors independence Candid and ongoing communications are vital Timely and robust dialogue on complex issues isessential Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 9. Risk Management Understand how processes are tailored to meetcompanys specific needs Ensure processes are ongoing, with appropriate staffing Meet periodically with Chief Risk Officer Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 10. Compliance and Ethics Review and approve code of conduct Ensure staff receive and understand the code Management exhibits ethical behavior Understand program for monitoring code compliance Review reported violations and follow-up actions Whistleblower / complaint hotlines Review reported complaints / ensure actions taken aretimely, consistent, and appropriate Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 11. Oversight of Management Noses In. Fingers Out. Communicate openly / challenge as appropriate Balance advising with fiduciary duty role Strong, open two-way communications Management should seek committees input in advanceof key decisions Evaluate managements performance and assess benchstrength Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 12. Life Challenges How the Audit Committee meets increasingaccountability and regulatory and statutory mandates Have clear vision of what should be doing Have the right directors on the Committee Have effective structure to let them do work Have a committee mandate - not a one time activity Receive pertinent information and timely briefings Have access to right people at the right time Ensure time is well spent and activities are focused Ensure the Committees voice to be heard Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 13. Members Attributes Good understanding of the businessincludingcompanys products, services, and industry Willingness to dedicate substantial time and energy Other relevant attributes Extremely high level of integrity Healthy skepticism and courage to challenge Inquisitiveness and independent judgment Good financial knowledge Regular training / orientation Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 14. Meeting-Planning Tips Strategies to cope with expanded workloadand ensure good steering of agenda. Use a schedule planner over the year Balance workload across meetings Meet in person at least 4 times a year, 2-4 hrs each Detailed, written agenda and briefing materials submitted at least 10 days in advance Expect chairperson to facilitate discussion, encourage meaningful participation, hold pre-meetings to explore issues, and ensure the right people attend Ensure accurate minutes are kept to summarize meeting discussions and capture follow-up actions for accountability Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 15. Participants Should allow frank discussion of confidential matters Both internal audit director and external auditors typicallyattend every meeting Managements participation is important Ask CEO / CFO to be on call during the meeting Avoid schedule multiple board committee meetingsconcurrently Meet privately with IA director, external auditors, financemanagement, and others, as warranted Guard against too many observers May engage outside specialist as necessary Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 16. Committee Evaluation Evaluate committee performance regularlyby comparing activities against Charter Board approved mandate Regulatory requirements Leading practices Assess committee dynamics, not only on what thecommittee does, but also on how effectively it functions Should be robust no check the box Obtain feedback from board, management, internalaudit, general counsel, and external auditorsAccountability and Practices of Todays Audit Committee in Enhancing Good Corporate GovernancePairat Srivilairit [email protected] 17. Use of Internal Audit Internal audit must have appropriate statue in thecompany, by Dual reporting relationship to AC and CEO Ensuring IAs continual access to committee Committee play key role in selection, evaluation, compensation, succession of IA director Review and approve IA charter and plans Monitor plans / approve major changes Understand audit results / focus on findings and follow-up action Ensure IA has budget and resources needed Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 18. Increase IAs Effectiveness Open communication with management and committee Ask stakeholders feedbacks Strategy linked to objectives / stakeholders value Focus more on risk / governance Systematically-prioritized and adaptable plan Reduce routine and low value-added activities Automate fraud detection / shorten reporting cycle Attract and retain top talents Third party expert / IT audit Adherence to auditing standards and ethics Strengthen business knowledge and computer skills Play risk and governance educator role Quality assurance review Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 19. SummaryAccountability and Practices of Todays Audit Committee inEnhancing Good Corporate Governance: New requirements for accountability present a uniqueopportunity for audit committee and internal auditors toadd value to organization. Audit committees must understand internal audits role ifthey are to work effectively and share a healthyinterdependence. The internal auditors provide objective assessment onthe state of the organizations risk, control, governance,and monitoring activities to the audit committee. Audit committees provide validation and oversightto the internal auditing activities. Accountability and Practices of Todays Audit Committee in Enhancing Good Corporate Governance Pairat Srivilairit [email protected] 20. Q&A PAIRAT SRIVILAIRITCIA, CISA, CBA, CCSA, CFSA, CISSP, CFE Internal Audit Department TISCO Bank Public Company LimitedMobile: +668 1903 1457Office : +66 2633 7821 Email : [email protected] and Practices of Todays Audit Committee in Enhancing Good Corporate GovernancePairat Srivilairit [email protected]