Effective Internal Audit for Central Banks

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Monday 19 April 2010

Internal Audit in the Risk Management Life-Cycle

The changing central banking governance landscape
Peter Nicholl, Former Governor, Central Bank of Bosnia & Herzegovina

Internal auditors can only deliver effective assurance and consultancy services if they have a sound appreciation of the structural, cultural and political frameworks of the central banks they serve. In this opening session an experienced central banker will provide an overview of the governance of central banking and assess how the financial crisis has created new challenges and opportunities. Specific attention will be paid to how organisational and supervisory structures have changed, the new types of people being employed by central banks, emerging communication channels and alterations in systems and processes. Delegates will have the opportunity to compare the situation at their home institutions with those of their peers.

Internal audit and risk: developing synergies between internal audit and operational risk management
Aline Lunel-Jurgensen, Head of Internal Audit for Head Office, Banque de France

In this session the speaker will investigate how internal auditors and operational risk management can work together in view of a better management of business and reputational risk in a central bank. Both functions have seen their role increase dramatically in the recent years and should definitely, for the sake of efficiency, develop synergies in their common filed of professional interest, ie analysis and reduction of risks in the organisation.

Enterprise risk management: evolution of a strategic function
Tony Fudge, Quality Assurance Director, Barclays Internal Audit

Over the last 18 months central banks, as with many other organisations, have faced hard-to-predict, highimpact risks that flow from changing business priorities and market conditions. Stemming from such threats as increased asset price volatility and the global liquidity crunch as well as natural disasters, pandemics and political crises these extreme risk exposures are a challenge that all internal assurance departments need to address. One means for to achieve this is through embedding of an enterprise-wide approach to risk management and in this session, the speaker will discuss how internal auditors can better manage strategic, business and reputational risk through a more flexible audit planning and a more frequent assessment of risk.

Managing the risk of fraud
Jim Gee, Director of Counter Fraud Services Macintyre Hudson LLP and Chair Centre For Counter Fraud Studies

Today’s interconnected, complex and increasingly automated financial systems may have reduced the risk of fraud. But they have not eliminated it. Beyond the headline-grabbing cases, such as the 2009 Madoff scandal, there are a considerable number of incidents that have significant cost implications. Central banks are by no means immune to this, and the importance of reputation places a premium on internal procedures and working practices with inbuilt counter-fraud mentalities and disciplines. In this session a leading expert will share his thoughts about how central banks can develop an anti-fraud culture and put an economic cost against the risk of fraud losses.

Tuesday 20 April 2010

New Tools and Techniques

The internal auditor’s toolkit
Ken Ebbage, Chief Executive Officer, Pentana

Recent years have seen a shift away from internal control to risk-based auditing. Yet in order to provide assurance and consultative services in an efficient and effective manner it is important that the tools and techniques are understood and applied. In this session an experienced internal auditor will outline the ways in which central bank internal auditors can improve their day-to-day effectiveness. The speaker will touch on the key challenges surrounding macro audit planning, micro audit planning, documenting of information, reporting, quality assurance and audit documentation.

Auditing outsourcing
Hilde Oiseth Nordlid, Senior Advisor, Norges Bank

The Central Bank of Norway has for the past 10 years restructured and reduced the number of employees in part by outsourcing non-core business. The objective of the outsourcing programme was to enhance the efficiency of core activities and give heads of business lines incentives to raise the efficiency of their own activities and create a competitive environment around common support functions. In delegating work to an outside group a central bank exposes its reputation to a new set of risks. In this session, the speaker will share her experiences of conducting audits and will lead discussion about how to develop a proactive audit scope of outsourcing projects and the effective audit of service providers and vendors.

Demystifying information systems auditing
John Machin, Partner, KPMG LLP

Internal auditors need to understand the strategic importance of information systems within business operations and management and the principles of information integrity, confidentiality and availability that underpin them. Moreover, in today’s reduced-spend environment, technology is increasingly the focus for drives to reduce costs and improve productivity. Yet risk management and control cannot be compromised. In this session a seasoned information systems auditor will facilitate a discussion about the key issues for consideration when planning and delivering an effective audit of IT. This session is set in the context of the unparalleled challenges that have faced financial institutions leading up to and during the financial crisis, and mindful of the speed of response that institutions, including central banks, have had to demonstrate to it.

Enhancing good governance through the auditing of soft controls
Workshop led by the chairman

It is widely acknowledged by governors, stakeholders and senior management that a central bank’s most important asset is its reputation. Much emphasis is put on the importance of ‘soft’ values, ethics and bank culture for it is in this way that not only can the bank do the right thing but also be seen to be doing the right thing. Therefore, professional internal auditors will ensure that these soft controls are audited. The course chairman will lead a workshop that focuses on how internal auditors can contribute to and audit the
culture and values in an organisation.

Internal audit in recovering markets: doing more with less
Tim Keohane, Banking & Capital Markets, PricewaterhouseCoopers

In order to continue to provide assurance that their central banks are working well it is vital for internal audit departments to be aware of how risk profiles and tolerances are changing. In this session an expert will share his thoughts about the main challenges facing internal auditors in the wider financial marketplace.

Wednesday 21 April 2010

Adding Value Through Internal Audit

Performance measurement
Jana Bacova, Executive Director of Internal Audit, Czech National Bank

One of the most enduring difficulties facing internal auditors is the need to continually demonstrate and communicate to audit committees, management, and internal customers how and where they add value. However, given the range and complexity of the audit projects that they carry out makes truly meaningful performance measures difficult to develop and communicate. In this session an experienced internal auditor will critically assess the value of quantitative and qualitative measures in measuring the performance of the internal audit department. Attention will also be paid to how internal auditors can better utilise well known outcome-based metrics such as return on investment (ROI), cost and customer satisfaction.

The partnership between internal and external audit
Speaker to be confirmed

The external auditor brings experience of a wide variety of institutions while the internal audit function will be more acutely aware of the particular risks to which the central bank is exposed. Yet, their relationship is potentially an uneasy one. Keeping lines of communication open is vital to avoiding this, the screening and evaluating of a central bank’s operations carried out by internal audit makes the work of external auditors easier, while external auditors can provide an assessment of the internal auditors’ work and inform about their findings and recommendations. This session will discuss how internal audit can work with their external counterparts to improve the service given to the central bank.

Demonstrating value: internal audit reporting
Julie Champagne, Deputy Chief, Internal Audit, Bank of Canada

With central bank budgets subject to greater scrutiny by management and stakeholders, internal auditors have been challenged to pay special attention to the value that their departments deliver. It has also become increasingly important that internal audit demonstrates its value to internal customers, notably the audit committee and senior management. In this session the speaker will examine internal audit reports and share some thoughts about how to ensure that reports matter, what should be included and excluded from a report, how long or detailed a report should be. Conclusions will be drawn about how internal auditors can get the best value out of the reports that they produce.

Thursday 22 April 2010

Maximising Effectiveness of the Internal Audit Team

Managing and developing internal audit talent
Molefi Nkhabu, Head of Internal Audit Department, South African Reserve Bank

To deliver an effective internal audit the auditor needs a deep understanding of central bank functions and the key risks that they are susceptible to, along with the highest level of technical auditing expertise. This requires a combination of staff with internal knowledge as well as those with externally developed skills, which managers must bring together to work as a dynamic unit. One method to stay abreast of the changes affecting the business they serve, is to devote adequate resources to develop ongoing training and development programmes. In this session the speaker will outline how a talent management strategy can be the cornerstone of an effective internal audit department and explain how by implementing such procedures senior internal auditors can demonstrate the value that they add to the bank.

Group discussion: maximising the value of ‘soft skills’ in internal auditing
Led by the chairman

Internal auditors have a range of techniques and tools to help them carry out their duties but in the end the success or otherwise of the function depends on each auditor having the necessary knowledge and skills to provide assurance, consultation and teaching services. In this group discussion delegates will be asked to consider the relative importance of the following skill sets in becoming a first rate internal auditor.

Course conclusions
Led by chairman

The course concludes with a discussion led by the chairman. This provides a chance for delegates to share views and experiences gained during the four days of the course and draw conclusions. Delegates will be given the opportunity to draw up action plans to take back to their home institution.