Issues and opportunities arising from changes to internal audit
The Chartered Institute of Internal Auditors has introduced new guidance this month with the aim of improving the effectiveness of Internal Audit in financial services. The desire for the additional guidance arose from an analysis of the financial crisis and recognition from regulators of the potentially influential role that internal audit could play within organisations and across the financial sector if operating effectively with a consistent application and interpretation of auditing standards.
The key recommendations of the code are:
- The scope of internal audit should be unrestricted so that internal auditors are able to assess the management of any risk in any part of the business.
- Internal Audit should assess whether the organisation's processes and actions are in line with its values, ethics, risk appetite and other policies.
- In order to maximise its independence and objectivity, the primary reporting line of internal audit should be to the chair of the audit committee.
- Internal audit should be adequately resourced, skilled and quality assured.
We believe that there will be more of a focus from internal audit on how actuaries do their work. This will not only include the usual assessment of the design and documentation of processes and controls, testing of the effectiveness of those controls in operation, assessment of compliance with internal policies and TAS compliance, but also consideration of the culture around the risk and controls and how business is conducted. We expect that there will be more real time auditing of projects, so it is worthwhile building in buffers in your project planning for those last minute challenges coming from audit.
Actuaries in senior management can expect to see Internal Audit interested in exploring how strategy is developed, the 'tone from the top' and the interaction between each of the three lines of defence.
As a result, we expect to see an increased number of roles and opportunities within Internal Audit for actuaries as Internal Audit departments build up their specialist insurance skills.
During the next few months we will be considering which CPD activities we can provide to help actuaries prepare for these changes. If you have any views, please let us know.'
Ross Gardiner
20 July 2013