Presentation by Jose Viegas Ribeiro on Interim or transition solutions for strengthening the independence of the IC units until the system becomes fully operational at the workshop on Improving outputs of internal control units through self-assessment co-organised by SIGMA with the Ministry of Finance of Jordan, Amman 6 November 2014.

1. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Workshop on improving outputs of internal control units through self-assessment Interim or transition solutions for strengthening the INDEPENDENCE OF THE IC UNITS until the system becomes fully operational
José Viegas Ribeiro
Amman, Jordan
6 November 2014
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2. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
•INDEPENDENCE - IA should act according to the professional and internationally accepted audit standards, including those pertaining to independence (e.g., ISA 200, IPPF 1100)
•Independence means freedom from conditions that threaten the ability of the IA unit to carry out IA in an unbiased manner, and should also be reflected in key documents, like the Code of Ethics and the Audit Charter
•The auditor´s independence safeguards the IA ability to form an audit opinion and recommendations (based on their findings and conclusions) without being affected by influences that might have an impact on the auditor’s integrity, objectivity and professionalism
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3. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
The possible solutions that we suggest in the next slides can all be used together, so this is not about choosing between some of them.
But at the same time, they can also be used according to the Jordanian stakeholders priorities and needs, starting with those who are understood and perceived as more relevant and urgent (as mitigating measures).
Others might be implemented gradually or according to an action plan/road map, until the internal audit function becomes fully operational.
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4. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 1
Ministry of Finance to carry out audit work at the Ministries where the Internal Audit Units are not yet set or not yet operational, given its strategic and overall responsibility over the system functioning (to avoid the existence of “shadow areas” - areas not covered by the audit function).
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5. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 2
Ministry of Finance to carry out audit joint audit work (joint missions) with the sectorial audit units at the Ministries where the Internal Audit Units are not yet fully operational, to contribute for the enhancement and strengthening of the respective audit units (also performing on-job training).
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6. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 3
Strengthening of the Audit Bureau (AB) risk assessment approach, in order to further identify the key inherent and control risks of the ministries where Internal Audit Units are not yet set or not yet operational, to avoid the existence of “shadow areas” (areas not covered by the audit function) and provide a reaction/response to the management lack of awareness on the importance of the internal audit function in these ministries (e.g, by considering these Ministries as a priority in AB annual audit strategy and plan).
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7. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 4
Strengthening of the coordination of the Audit Bureau and Ministry of Finance annual audit plans to assure an horizontal coverage of the different line ministries, with particular focus in the ministries where Internal Audit Units are not yet set or not yet operational.
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8. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 5
Internal audit units of the line ministries to send their annual audit plans and annual activity reports not only to the management, but also to the Ministry of Finance (vg, Central Coordination Unit) , to facilitate the supervision and quality control of those documents to be carried out by Ministry of Finance Central Coordination Unit.
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9. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 6
Internal audit units of the line ministries to send their audit reports (or specific reports) not only to the management, but also to the Ministry of Finance (e.g, Central Coordination Unit – see article 4b, of the draft amendment to the Financial Control Bylaw nº 3/2011) , to protect the effectiveness of the audit work and the independence of the auditors.
[At least, until the Internal Audit Follow Up Committee, foreseen in article 4, c, of the Draft amendment to the Financial Control Bylaw nº 3/2011, becomes fully operational.]
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10. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 7
Assure and strengthening the effectiveness of the supervision and quality control role to be carried out by the Internal Audit Follow Up Committee (foreseen in article 4, c, of the Draft amendment to the Financial Control Bylaw nº 3/2011), by creating the functional, operational and logistical conditions needed for the Committee to play a relevant role in contributing to safeguard the independence of the auditors of the different Internal Audit Units.
[See also solution 6]
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11. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 8
Development of a real and day to day functioning internal audit system, with an active coordination of the MoF Central Coordination Unit and encompassing the audit units of the line ministries, to assure that auditors could become part of an effective community of professionals, and to avoid the feeling of standing alone.
Moreover they could share their own concerns about the need of increasing and/or assuring their own independence, and the issue could be channeled to the appropriate political/management level by the MoF Central Coordination Unit (for example, through the Internal Audit Follow Up Committee).
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12. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 9
In line with the previous solution, develop a real network between the internal audit units, to strengthen the possibility for the auditors to share their own concerns and questions, including specific and real situations where independence was/could be affected, that might also function as an “early warning” information for other auditors to learn about how independence could be affected and how this risk could be addressed (see also previous slide).
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13. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 10
Consider to give a role to the Ministry of Finance Central Coordination Unit and/or to the Internal Audit Follow Up Committee (foreseen in article 4, c, of the Draft amendment to the Financial Control Bylaw nº 3/2011), on key aspects of the functioning of the internal audit units, (eg, requirements for contracting and dismiss of the Heads of the IA units, salary policy), to strengthen the independence of the function.
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14. © OECD
A joint initiative of the OECD and the European Union, principally financed by the EU
Σ SIGMA
Interim or transition solutions for strengthening the independence of the IC Units until the system becomes fully operational
Solution 11
Consider to include requirements to assure the independence of the function in the legal framework
(eg, requirements for contracting and dismiss of the Heads of the IA units and salary policy).
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