The development of the Internal Auditing function to combat fraud and corruption

1. The development of the Internal Auditing function to combat fraud and corruption Martin Guozden CP, CPA, CIA, CISA, CCSA Office of the Auditor General

2. Agenda • IDB Group Systemic Framework against Corruption • Successful Internal Auditing Function • Regional Forums 2

3. Systemic Framework against Corruption • Personnel Internal Policies • Procurement Policies • Bank’s General policies and guidelines 3

4. Specific Bank’s Strategies • Code of Ethics (2006) • Policies for the Procurement of Goods and Works Financed by the Bank (2006) • Policies for the Selection and Contracting of Consultants Financed by the Bank (2006) • Modernization of the State Strategy (2003) 4

5. Key Developments Affecting Internal Audit Key • Professional Practices Framework • Internal Audit Expectations • Components of a Successful Internal Audit Strategy   5

6. Professional PracticesFramework • Definition of Internal Auditing • Code of Ethics • Standards for the Professional Practice of Internal Auditing • Attributes • Performance • Implementation Guidance • Practice Aids • Evolving Issues 6

7. Monitoring Operational Objectives Components Information and Communication Financial Information Operational Compliance Control Activities Activity 2 Risk Evaluation Activity 1 Unit B Unit A Control Enviroment System Components Interrelations Per COSO Internal Control - Integrated Framework 7

8. Internal Control Process Per COSO Guidance for Smaller Public Companies 8

9. Internal Audit Expectations • Aligning Internal Audit Objectives with Business Objectives • Demonstrating and Adding More Value • Internal Audit Becoming a Key Player in the Risk Management Process • Educating Management • Increasing Use of Technology • Increasing Use of Knowledge • Using “Non-Traditional” Internal Auditors 9

10. Necessary Investments for a Successful Internal Audit Human Resources Technology Knowledge Methodology Communications 10

11. The Evolution of Internal Audit Current State Desired State  Compliance Auditing Operational Process Reviews Internal Control Process Reviews Strategic Business Partner 11

12. Strategic Partnering Based Auditing Internal Audit work should be based on: • working with management – develop a thorough, shared understanding of the business and various business risks • determine the Business Risk Management Process (BRMP) that should be in place to effectively manage the key risks • audit for design, operational effectiveness and compliance within each BRMP component 12

13. Internal Audit’s Challenges Common Barriers Future Successful Internal Audit Function Internal Audit Challenges and Barriers • Aligned with organization’s business objectives • Acts as corporate change agent • Risk model focus is on enterprise risk • Investments enable Internal Audit to keep pace with changing business environment • Internal auditors are better prepared for future leadership roles • People • Methodology • Knowledge • Technology • Communications • Provide More Value • More Comprehensive Risk Coverage • Operate More Efficiently Significant Investments Often Needed 13

14. Regional Forums-Objectives • “Logical Framework workshop” to develop a plan of action that serves as a foundation for future actions of the Bank in strengthing the control and internal auditing • “Forum on Internal Auditing” to share knowledge and information regarding the internal audit’s role, along with a presentation of the plan of action; as a result of the logic frame workshop. 14

15. Regional Forums - Participants Logical Framework Workshop • Public Institutions – Technicians • Special Guest • Donor's community • IIA, OLACEF, CAROSAI Forum on Internal Auditing • Logical Framework workshop participants • Public Institutions – Authorities 15

16. Regional Forums-Expectations • Pilot Porject in Central America • Finnancing obtained for a new project • Analysis from obtianed results • Expand to the rest of the Region 16

17. Questions