Audit

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Audit committees must balance independence with competence
July 2016

Audit committees must balance their ability to be independent with the right level of competence if they are to effectively challenge management, according to attendees at a recent event organised by European Confederation of Directors Associations (Ecoda) and Pwc.

“Too much independence for audit committee members could come at the price of less competency,” UK non-executive director Philip Johnson, told delegates in Brussels in June. He said finding independent members can prove to be difficult as a result of over-regulation and, therefore, said their effectiveness should be prioritised over independence.

Inge Boets, a member of several audit committees in Belgium, said that while it was preferable to have a majority of independent members on the audit committee, having a committee that had complementary and diverse experience was also key.

Tjalling Tiemstra, Chairman of the Audit Committee at ABN Amro Bank and various other non-executive positions in the Netherlands, said that it was important that audit committee members were on a similar level of competency as the chief financial officer.

“I feel there is a lack of recognition of the importance of competency, as the audit committee requires ability and character to challenge management,” Tiemstra added.

The event focused on the corporate governance implications of the recent EU Audit Directive and Regulation, which was adopted by the European Union in 2014. The rules, which came into force this year, give additional oversight responsibilities to audit committees.

Alain Deckers, Head of Unit, Audit and Credit Rating Agencies, DG for Financial Stability, Financial Services, and Capital Markets Union (FISMA) from the European Commission, told delegates that twenty countries would have had completed their preparations for the new legislation by the end of the summer. He said that better engagement with the European Commission and audit committees would help bed in the new rules.

“There appears to be an unequal experience when it comes to engaging with audit committees,” he said. “Better engagement can allow us to understand how processes are handled.”

Click here for an EC fact sheet on the new rules.

Click here for a summary of the event.

Audit bodies deepen cooperation
December 2014

The ECIIA deepened its cooperation with the European Organisation of Supreme Audit Institutions (EUROSAI) at a meeting in Riga, Latvia recently when both bodies agreed on a further raft of joint initiatives.

They included creating a team of key people across the two organisations to coordinate their shared efforts, exploring the establishment of professional courses on matters of common interest and collecting information on the implementation of audit standards as well as planning for a range of co-organised events and publications.

“We are aiming to help auditors in the two bodies provide better assurance at a lower cost to their organisations,” Melvyn Neate, an ECIIA board member involved in the collaboration, says. “There is a grey area where the two professions overlap and our work together can help better clarify and coordinate the auditors’ respective roles and responsibilities so there are fewer black holes and little duplication of effort.”

Neate says that while supreme audit institutions are external auditors and tend to focus more on financial management in public bodies, they often rely on the work of internal auditors at the organisations they audit. By sharing knowledge and working practices, he says, they can improve the effectiveness of both corporate governance and their own audit work.

In June, ECIIA and EUROSAI, which groups 50 supreme audit institutions under its aegis, renewed their cooperation agreement. The document set the grounds for how knowledge sharing and consultation on issues important to each body is facilitated.

One of the early fruits of this renewed collaboration is the jointly-issued position paper Coordination and cooperation between supreme audit institutions and internal auditors in the public sector, which was published in June.

Download here.

Internal auditors and supreme auditors launch cooperation initiative
June 2014

The European Confederation of Institutes of Internal Auditing (ECIIA) and the European Organisation of Supreme Audit Institutions (EUROSAI) have formally agreed to support each other’s goals and objectives.

ECIIA Vice President Marie-Hélène Laimay and EUROSAI President Saskia Stuiveling launched the initiative in The Hague on 19 June 2014. The agreement aims to facilitate dialogue and knowledge sharing between supreme audit institutions and internal auditors across the public sector in Europe.

“It is important that we develop a common understanding of the issues at stake in public sector governance and auditing,” Laimay said, “and mutually understand each other’s roles, responsibilities and expectations.”

While supreme audit institutions act as external auditors to government bodies, their work can depend on, or overlap with, internal audit, even though they operate independently of each other. A recent study by the two bodies –  Coordination and cooperation between supreme audit institutions and internal auditors in the public sector – showed that only a minority of European jurisdictions had explicit rules in place that dealt with how they should coordinate their work.

The bodies have agreed to share their experiences of implementing their professional standards and to consult on issues of common interest to deepen their joint understanding of how best to coordinate their members’ activities. They agreed to explore further ways of working together to improve the effectiveness of, and communication between, supreme audit institutions and internal auditors within Europe.

The ECIIA working party to the agreement included Juan Ignacio Ruiz Zorrilla, Soledad Llamas, Elena Lucas and Melvyn Neate.

Tags: Advocacy, Audit
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