Date: May 22, 2014
Mr. Tan, a shareholder of company X, was present at its Annual General Meeting. As he was not certain about the function of internal audit of the company, he decided to clarify his doubts at the AGM and asked the Board, “Does your listed company have an IA function?” The CEO replied, “That is a very good question. Let me start by highlighting that listed companies are required to disclose in their annual reports any deviations from the Code of Corporate Governance. What is the Code of Corporate Governance? It is under the purview of the Monetary Authority of Singapore and Singapore Exchange. It is stated in the Code that “The Company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.” When a listed company is unable to comply with the Code, it must be explained in our annual reports the reasons for deviation from the Code.
CEO further added, “The SGX Listing Rule 1207(10) that came into effect on 29 September 2011 was applicable for listed companies to require the Board to provide an opinion, with the concurrence of the Audit Committee, on the adequacy of internal controls; addressing financial, operational and compliance risks. The Board therefore needs IA’s services to ensure that internal controls are adequate and effective. Hence IA plays a key role in supporting the Board.”
Having gained much clarity, Mr. Tan posed his last question, “What services does IA provide in connection with fraud?” The CEO responded, “The prevention, deterrence and detection of fraud are the responsibility of management. However, IA’s role is to ensure there is a process by management to manage fraud and that they are efficient and effective.”
Mr. Tan left the AGM happy and satisfied as he was able to gather greater insight on the internal audit function in the company. He opines that internal audit will help to safeguard the interest of the company which in turns protects the interest of the stakeholders.
This article is contributed by The Institute of Internal Auditors Singapore.