B2: Public sector audit committees

Report
B2 – Public Sector Audit Committees: What is all
the fuss about?
Jenny Morison FCA
Director – Morison Consulting Pty Limited
Thursday 20 November 2014
2.10pm – 3.00pm
#CPACONGRESS
Public Sector Audit Committees: What is all the fuss about?
Introduction:
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History of Commonwealth Public Sector audit committees
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Membership and Audit Committee functions
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The changing role of the independent member
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What does a high performing Audit Committee look like?
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Challenges facing Audit Committees
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History of Commonwealth Public Sector Audit Committees
Pre Public Governance, Performance and Accountability Act 2013
Audit Committees- increasing legislative basis:
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Prescribed by Section 46 of FMA Act 1997- Departments
Prescribed by Section 32 (Authorities) and Section 44 (Companies) of the
CAC Act 1997. CAC Regulations 1997-focused on membership
1 July 2011 -FMA Regulation 22C- covered membership and 12 functions
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Supported by ANAO Better Practice Guide -2005
Revised ANAO Better Practice Guide -2011
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History of Commonwealth Public Sector Audit Committees
Public Governance, Performance and Accountability Act 2013 (PGPA)
Continued legislative growth- who are we providing assurance to?
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Prescribed by Section 45 of PGPA and PGPA Rule 2014 Section 17Corporate and Non-Corporate Commonwealth Entities
Prescribed by Section 92 of the PGPA and PGPA Rule 2014 Section 28Commonwealth Companies
Department of Finance Resource Management Guide No 202
JCPAA April 2014 review
Revised ANAO Guide Charter – August 2014
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Membership and Audit Committee functions- PGPA Rule Section 17
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Membership – very prescriptive
- 3 persons
- post 1 July 2015-majority of members “independent”
- not CFO, CEO or head of the accountable authority
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Membership and Audit Committee functions- PGPA Rule Section 17
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Functions- reduced to four from previous 12 under FMA Reg 22 C
- financial reporting – refer PGPA Section 42
- performance reporting- refer PGPA Section 39
- system of risk oversight and management- refer PGPA Act Section 16,
PGPA Rule Section 10 (fraud) and Commonwealth Risk Management Policy
- system of internal control- refer PGPA Act Section 16- approaches to
compliance and assurance
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Changing role of independent members
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Complying with PGPA Rule Section 17
- options for achieving majority independent membership of the Audit
Committee
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The case for skill based independent members
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Are independent Chairs the best model?
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Independent Chairs- how to move to trusted advisor status
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Challenges
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What does a high performing PGPA Audit Committees look like:
Ten years ago:
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Large numbers of members including CFO
Representational membership, very few independents
Focussed on financial statements and external audit
Internal Audit Functions of varying standards
Internal Audit Reports, little linkage to risk or understanding of role in
broader assurance
No visibility of the CEO to the Audit Committee
Poor understanding of AC’s role in governance structure
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What does a high performing PGPA Audit Committees look like:
Today:
- Smaller committees (may reverse with PGPA) with blend of senior
executive/ solid independent members, solid observer attendance
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Increased focus on assurance, risk removed from Committee name for
clarity of functions
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CEOs attend ACs who in turn expect strong tone from the top to support
AC activities
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AC’s role in governance structure better understood and respected
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What does a high performing PGPA Audit Committees look like:
Today (cont’d):
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Internal Audit Functions have matured, blended or outsourced internal
audit functions. New providers have entered the market
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Internal Audit Reports, better linkage to risk, broader assurance and ANAO
activities. Focus of audit activity on second, rather than first line of
defence assurance activities.
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Use of AC sub-committees to explore areas in depth eg Financial
Statements and IT
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What does a high performing PGPA Audit Committees look like;
In response to PGPA:
• Expect “strong tone from the top” to support AC endeavours
• Recalibrating AC Charters and work-plans- to reflect priorities of the entity
not a continuation of old FMA task based Charters
• Membership and activities of the Committee are totally focussed on
providing assurance to the accountable authority, not other interested
parties
• A maturing of the relationship with the ANAO in regard to AC dialogue on
Performance Audits
• Taking a leadership position on assurance, repositioning internal audit to
be forward facing
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Challenges facing Audit Committees
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Still a challenge for Chief Internal Auditors to be at a senior
enough level to be able to influence
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Continuing to protect the internal audit budgets in a fiscally tight
environment
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Length of time to undertake audits- KPI 20 weeks often
exceeded
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Getting the right internal audit provider
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Role in embedding risk management with entities- a challenge
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Questions????
Now let us have a conversation?? Any questions/comments??
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