Audit Committee & Reporting for Internal Auditing

• Functional reporting flows to the Board of Directors (BoD) through the Audit Committee (AC).
• The Chief Audit Executive (CAE) can't be a member of the AC.
• The CAE reports to the AC.
• The Internal Audit Function (IAF) reports to the BoD through the AC.
• To present a theory, state it, explain it, and conclude.
• The Chairman of the Board shouldn't be part of the AC.
• A non-executive director from another company can be on the AC.
• AC members must be independent non-executive directors.
• The CAE, while not an AC member, may functionally report and attend meetings with the CEO.
• The CEO can't be on the AC due to involvement in daily operations.
• Classify roles as executive, non-executive, or independent non-executive.
• A person needing to be an independent ED cannot be on the AC.
• Study the connected case and give a conclusion.
• The CAE on page 57 should be the CEO.

Mandatory Guidance of IPPF

• The International Professional Practices Framework (IPPF), issued by the IIA, consists of mandatory and recommended guidance.
• The mandatory guidance of which the IPPF includes Global Internal Audit Standards (GIAS) and Topical Requirements.

Purpose of Internal Auditing

• Internal audit (IA) strengthens an organisation's ability to create, protect and sustain value.
• IA supports the Board and Senior Management with independent, risk-based, objective assurance.
• IA provides advice, insight, and foresight.
• IA enhances the organization's successful achievement of its objectives.
• IA strengthens governance, risk, and control (GRC) processes.
• IA also improves decision-making and oversight
• IA boosts reputation and credibility with stakeholders.
• IA adds to the ability to serve the public interest.

When IA is Most Effective

• IA is most effective when performed by competent professionals in accordance with the GIAS.
• The internal audit function (IAF) must be independently positioned with direct accountability to the Board.
• Internal auditors should be free from undue influence and committed to making objective assessments.

Std 3.1 Competency

• Assigning a staff member of questionable competence to the audit violates the Ethics and Professionalism Domain.
• Internal auditors must only engage in services for which they have or can attain the necessary competencies.

Std 5.2 Protection of information

• Disclosing confidential information to the production manager, who doesn't need to know, is a violation of the Ethics and Professionalism Domain.
• Internal auditors must protect information and demonstrate respect for confidentiality, privacy, and ownership.
• Don't disclose confidential information to unauthorized parties unless legally or professionally responsible.
• Disclosing confidential information to a family member is also a violation Internal auditors must protect information acquired during internal audit services or professional relationships.

Std 1.1 Honesty and professional courage

• Deleting material information from working papers and the planned report violates the Ethics and Professionalism Domain.
• Auditors must disclose all material facts that could affect the organization's ability to make well-informed decisions if not disclosed.

Std 2.2 Safeguarding Objectivity

• Accepting gifts from senior management violates the Ethics and Professionalism Domain.
• Auditors must not accept tangible or intangible items (gifts, rewards, etc.) that may impair or be presumed to impair objectivity.

Std 2.2 Safeguarding Objectivity

• If internal auditors provide advisory services related to activities for which they had previous responsibilities, they must disclose potential impairments to the client.
• Permission must be granted before accepting the engagement.

Std 3.1 Competency

• Internal auditors should possess knowledge, skills, and abilities suited to their job position and responsibilities, commensurate with experience levels.
• Junior internal audit trainees need not possess the expertise of an IT auditing expert.
• If Cathy were to be assigned to provide IT related internal audit services, then she would be in violation of this Standard.

Std 2.2 Safeguarding Objectivity

• According to the standards, “internal auditors must refrain from assessing specific activities for which they were previously responsible within the previous 12 months” (one-year rule).

Std 7.1 Organisational Independence

• The CAE should directly coordinate and report to the Audit Committee as well as meet with the Chief Executive Officer of KG Limited.
• Functional reporting goes to the Audit Committee, and administrative reporting goes to the CEO.

Ethics and Professionalism

• Ethical standards are pertinent to working with integrity.
• Taking leave from work may be allowable, depending on the HR policy and leave regulations of the company.

Relationships between Internal and External Auditors

• Oversight of the work of external auditors isn't the responsibility of the chief audit executive which would make it a false statement.
• Schedule sufficient meetings between internal and external auditors for timely completion.
• Internal and external auditors may exchange engagement letters and communications.
• Internal auditors may provide engagement work programs and papers to external auditors.
• Recent changes now make Internal auditors partners rather than subordinates.
• This is because of the increasing external auditor liability and the increasing professionalism of internal auditors.
• Also note the evolving economics of external auditing.
• Internal/external factors may be the use of computerized accounting systems.
• Subsidiaries foreign audit firms may rely on reliance of internal audits for functionality.
• To use the work that has been performed copies of the working papers is most appropriate response to the foreign subsidiary's auditors.
• This should be done after the parent firm has granted permission.

Improving Auditor Efficiency by Relying on External Audits

• Conducted by the Ethics and Professionalism domain.

The Role of Internal Auditors in External Auditor Services

• Internal auditors help develop policies for selecting, evaluating, or retaining external auditor services beyond external audits.
• This practice facilitates the acquisition of services economically and effectively.

Limitations on Audit Committee Effectiveness

• Audit committees may be composed of directors who have close personal and professional friendships with management.

Dual Relationship of Internal Audit Function

• The internal audit function has a dual relationship.
• Communications are verified with management, and then the internal function reports to management and the audit committee
• The committee consists of well compensated members, but favor an owners view.

Benefits Provided by Audit Committees

• Protect the internal audit function's independence from undue management influence.
• Overall, audit committees serve the function within internal audit.

Appropriate Responsibilities of Audit Committees

• Review the internal audit engagement
• It consists of the chief audit executive, chief, the audit activity’s engagement work schedule submitted by the chief audit executive.

Avoiding Conflicts between CEOs and Audit Committees

• Policies should be set out to cover how they relate
• The chief audit committee should request board establishment of policies covering the internal audit activity’s relationships with the audit committee.

Benefits of the Audit Committees

• They monitor recemmondations properly.
• Supporting proper monitoring is of the greats benefit to the internal audit function.

Features of Organisational Structure That are Control Weaknesses

• Consisting of internal stakeholders is a control weakness.
• The audit committee of the board, the chief executive officer, the chief financial officer, and a major shareholder.

Control Processes Strengthened by Audit Committees

• Audit committee strengthen the control process of an organisation
• This is done by recommendations made by the chief audit executive.

Establishing an Audit Committee

• The committee will be charged with all aspects of authority.
• The approval of selection and dismissal of the chief audit executive is normal responsibilities for authority.

Oversight and Assistance of the Board

• The audit committee's required so the board of directors get help in fulfilling oversight responsibilities.
• It must state the audit committees purpose.

Communication Activities of the Chief Audit Executive

This includes but is not limited to:

• Keep the audit informed on trends.
• Issue periodic reports to the audit committee and management.
• Confirm work coordination of internal/external.

Supporting the Audit Committee

• The chief audit executive should support/is responsible for helping ensure role activities
• They do this so the committee is appropriate for charter and achieves responsibilities.

Effectiveness between the CAE and AC

• The Chief Audit Executive (CAE) does not need review information, just provide it to the audit.
• Overall, the CAE and Audit Committee's (AC) effectiveness increases if the CAE provides communication in specific areas.

The Board

• Consists of six executive members and two non-executive members.
• The Board meets thrice annually to assess operations, strategy, plans, policies, budgets, and contracts.

Board Members and Committees

• Antonio Williams, chief executive officer, is also chairman. Other members are managing and financial directors, etc.
• There are also non-executive directors.
• Responsibilities have been allotted to Board committees.
• The audit committee has a process in place to develop term of reference for board committees.

Requirements of Sound Corporate Governance

• The Board lacks proper balance of executive and non-executive directors.
• Two non-executive directors may not bring sufficient independence.
• The Board needs a majority of non-executive directors for independence according to King IV.

Frequency of Board Meetings

• The Board should meet at least four times annually, meeting less at three times goes against best practices.

Roles of CEO and Chairperson

• Antonio Williams serves as both CEO and chairperson.
• These roles should be separated, the chairperson should be an independent non-executive director.

Independence of Audit Committee

• The audit committee should be non-executive and independent, contrary to the current state.
• An independent non-executive director should chair the audit committee.
• The majority of members must be non-executive, preferably independent, per King IV standards. This is not done due to the present state.

Members of the Auditing Committee

• External auditors, the financial manager and the Chief Auditor Should not be committee members
• All other members can assist, act as advisors and observers only.

Purpose of the Audit Commmittee

• Not serving it's intended purpose.
• The audit committee cannot serve its intended purpose given independence issues and the financial/accounting department's involvement.

Audit Committee Composition

• How many members should the audit committee consist of?
• Which directors should be appointed?

Statement on Board Leadership and Audit Committee

• Should you agree with the statement below? Why, why not?
• "The chairperson of our Board of Directors will also be the chairperson of the audit committee. She has in-depth knowledge of the company and will be able to make a valuable contribution".

Director Classification

• Is this person performing roles as executive directors, not as a non- executive one, or as an independent director?
• Mr X is the managing director of Anastasia (Proprietary) Limited.
• Ms Y is a managing director of Zeta Limited, a company in the same industry, Two years ago, Ms Y was the managing director of Anastasia Limited.

Meeting Frequency, Explanation

• How often should the audit committee meet and explain why.

Members of the Audit Committee

• The audit committee should consist of non-executive directors. Responsibility: Oversee matters of financial compliance.

Audit Committee and Board Chair

• The chairperson of the Board should not be eligible to be appointed as chairperson of the audit committee.
• Being the chair violates the ethics and professional standards guidelines.

Role of Executive Directors

• Mr X is an executive director. He is an employee, involved in managing the organisation
• Ms. Y is a Non-executive director, also involved in managing and but not independent.

Meeting Appropriateness

• The audit committee should normally meet at least four times a year in order to be proper (or best) practice.

General Guidelines for Structures and Functions

• The board must delegate its functions to the audit committee.
• Members must be independent and unbiased.
• The board must fully support their auditing committee.
• Appoint a chair, but note that a substantial part of success stems from their efforts.
• Maintain active communication.

Structure of Our Kraziness (IOK)) Board

• IOK applies the fourth King Report.
• Thandolwethu Solani is the Chairman and a shareholder of the company. She is a non-executive.
• Nompumelelo Jaca is the Chief Financial Officer (CFO).
• Thejal Kusial is a non-executive director that retired from marketing (IOK) two ago.
• Kathryn Steel, the Independent is also an auditor.
• Rutgurt Smith works for the Internal Kraziness (IOK). He is the Risk officer (CRO).
• Kamalin Naidoo works for the Internal Kraziness (IOK). He is the HR director.
• Remofilwe Nkwadi is an executive and owner for the supplier.
• Vincent Lolwana is the non-executive and husband for the appointee for Legal Affairs.

Invited to Meeting

• The following invited to meetings can be Tarin Mudaly and Tanner Hutchinson, Company, Chief Officer(s).

King IV Regulations

• The organisation must ensure compliance with the requirement of King IV
• This evaluation is intended to find non-compliance to identify it and provide suggestions that make the action compliant with King IV.

Non-Compliance Areas

• Solani is not an independent director.
• The directors do not represent all necessary fields.
• The minimum is at least the executives are not at appropriate level.
• The Executive Level(s) are the chief financial (officer CFO), for instance it would be recommended for Chief to be member of the body in order to properties.

Composition and Knowledge

• These recommendations are designed to ensure the governing body can fulfill responsibilities objectively and effectively.
• The governing body of the company should oversee the board.

Consideration

• Appropriate factors should consider an appropriate mix of skills and experience, including commercial and industry experience.
• Ensure a diverse amount of members including sufficient committee personnel.

Membership and Qualifications

• the government should be majority of non-exec membership.
• Minimum, and at least one other objective interaction point should be maintained with management.
• Ensure that the staff has knowledge in a field and promote it and in all races.

Board Composition at Boulders

• Boulders is testing for composition of a Body
• Some of its members are: Plastic as chairman, Plillay who is non-applicable, Hair is a Manager, White is their CFO, Bob is the Officer, Jackson is the Advisor, etc.
• Outside the roles, Dr. has non execution at Bank, Plillay is member of listed companies., Hair has operations, white the Advocate, Jackson services at Group Limited.

Proper Practice and Regulations for King IV

• Proper recommendations for King IV should be practices.
• The IV body the board members need to contain 6 in this instance.
• There is non-execution and the amount of workers may be about 5 and there may be no relations to interfere the independence.
• 2 directors should be members and the CEO and other, need to also be a part of the board.

Areas of Non-Compliances

• Chair of the board should be an independent non-executive director and in Solani's case, they are not
• As mentioned before, the BOD requires the correct directors.
• An Audit Committee is required for IA's to oversee financial compliance.
• Internal Auditors must make informed decisions.

The Main Components

• Main component of IAs include management and engagement.
• Good relations are important, and need to act objectively.

Relationship Dynamic

• How internal auditors relate to key players is important.

Key Players

• Top key players would be the Board, engagements, clients, externals, and others. In contrast, internal staff must be free to do tasks or things may be at risk.
• Chief or external executives act without force, meetings should be personnel too.
• Executive and non-executive director and a CEO are needed! Organizational status of A talks about the independence and reporting live functionally to and ad ming frat relay to line magazine.