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ECIIA Activity report: deepening governance community in Europe
ECIIA worked hard in 2016 to deepen its links with both the broader European governance community and its member institutes, according to its most recent Activity Report.
The Confederation strengthened its co-operation with rule-setters at the European Banking Authority, the European Central Bank and the European Commission through a series of consultations on internal audit guidance.
“We have played a very active part in promoting the value of internal audit in corporate governance structures this year,” Henrik Stein, ECIIA President, says. “That has included participating on working groups on non-financial reporting, for example, and making sure internal auditors’ voices are heard in important consultations.”
In addition, ECIIA strengthened its relationships with other professional bodies. That has included co-hosting events with the European Confederation of Directors’ Associations and the Federation of European Risk Management Associations.
“It is very important that the bodies involved in European corporate governance understand one another and share best practice and thought leadership,” Stein says. “I’m happy to say that collaboration between the different groups is growing stronger by the year.”
The Board and member representatives reformed the ECIIA’s Governance model, producing new Articles of Associations, which were approved at the Extraordinary General Assembly in October. In addition, two extended Board meetings with ECIIA member Chief Executive Officers helped reinforce the strong bonds between all parties.
Non-financial and diversity guidance due Spring 2017
The EC is producing non-binding guidance on how to implement its directive on the disclosure of non-financial and diversity information (2014/95/EU). Originally planned for publication in December 2016, the guidance is now expected in Spring 2017.
The directive requires around 6,000 large organisations to disclose the environmental and social impacts of their activities in their management reports. The first reports are due in 2018, based on financial years that end in 2017.
New reporting requirements shift disclosure focus
The European Union has put plans to introduce country-by-country accounting disclosures on ice. Instead, it is revising the existing Shareholder Rights Directive in a move that could create new opportunities for internal auditors, ECIIA says.
The revised directive establishes specific requirements to encourage shareholder engagement in the long term and increase transparency.
Lucia Žitňanská, Minister for Justice of Slovakia who helped broker the agreement with the EU, said: “The financial crisis revealed that in many cases shareholders supported excessive short-term risk-taking by managers. The revised directive is intended to redress this situation and contribute to the sustainability of companies, which will in turn help generate growth and create jobs. ”
Companies will need to improve the transparency of their reporting in several areas – including directors’ performance and remuneration, shareholder engagement and related-party transactions.
“These will be new areas of disclosure for many and having assurance that companies’ reports are fit for purpose will be key,” Henrik Stein, ECIIA President, says. “Internal auditors are well-placed to provide that support and should work with their organisations to ensure that the processes underpinning those requirements provide accurate and timely information.”
Getting to grips with non-financial reporting – FEE case study
The ECIIA welcomes a fictional case study produced by the Federation of European Accountants (FEE) aimed at helping businesses get to grips with the very real, mandatory non-financial reporting disclosure regime set to come into force across Europe.
The report – Disclose what truly matters – shows how the fictional company Jolie Vallée reports on a wide range of issues including business models, materiality and the environment. It includes hints, tips and further information on each topic.
“This document will help businesses and internal auditors get a better grip on what the challenges are to the new non-financial reporting regime,” Henrik Stein, ECIIA President, says. “It recognises that boiler-plate reporting is unlikely to be effective and will help companies that have not yet begun the process take the first step on their journey to excellence.”
Internal audit can contribute significantly to non-financial reporting and the ECIIA and its affiliates have produced a range of guidance on the subject, including:
The Directive should be finalised by end of December 2016 and detailed guidance completed by end of December 2017. Read more on the expected details of the directive here.
ECIIA insurance committee to strengthen industry ties
The ECIIA’s Insurance Committee has set out an ambitious strategy aimed at enhancing the professionalism of internal auditors working in the industry and at building stronger ties between firms, regulators and other stakeholders.
“Many insurance companies have greatly benefited from having strong internal audit functions working as the third line of defence in their businesses and we want to ensure that such best practice is spread throughout Europe,” Enrico Parretta, the Chair of ECIIA’s Insurance Committee, says. “ECIIA is ideally placed to bring together businesses, regulators and other professional bodies to strengthen the value internal audit adds to insurers in future.”
As part of the initiative, the committee plans to publish several position papers during the next twelve months. Topics comprise:
a clarification of the meaning of independence for an insurer’s internal audit function
the impact of Solvency II on the attributes and competencies of internal auditors
the relationship between the Audit Committee and the internal audit function following Solvency II
and, the role of internal audit in securing the right level of consumer protection for insurance buyers.
The European Confederation of Institutes of Internal Auditing strengthened its governance structure by creating both an audit committee and nomination committee at it General Assembly in Stockholm, Sweden this month.
“Our organisation promotes good governance through internal audit,” Henrik Stein, who continues as ECIIA President, says, “so it is entirely appropriate that we continue to improve our own structures to ensure we are well placed to continue our leadership role in this area.”
The ECIIA’s board approved new articles of association and internal regulations at the meeting. It also elected three new members to its management board: Verra Marmalidou, President of IIA Greece and Deputy Director of Internal Audit at NBG Group; Tomás Pivonka, Chairman of the Board at IIA Czech Republic and Chief Audit Executive at the European energy company CEZ; and, Gabriell Rudolf von Rohr, Chairman of the Board of IIA Switzerland and Director of Cantonal Financial Control in Solothurn. Martin Stevens stepped down from the Board at the end of his mandate.
ECIIA Board members elected to the audit committee comprise Nobert Wagner (Chief Executive Officer, IIA Austria), Hans Nieuwlands (Chief Executive Officer, IIA Netherlands, continues for two years in this role following his election in 2015), Linda Lundin (Chief Executive Officer, IIA Sweden).
ECIIA Board members elected to the nomination committee comprise ECIIA President Henrik Stein, Melvyn Neate from IIA UK and Ireland, and Ellen Brataas, Chief Executive Officer, IIA Norway.