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Risk Based Auditing in the Public Sector

Risk Based Auditing in the Public Sector. The Kenya Experiment ICGFM Miami Conference May 2006. Risk-Based Audit Concept. A powerful audit methodology Easily understood Not so easily practiced Useful accountability ‘tool’ Best practice. The Kenya Experiment. Partnership with the IIA

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Risk Based Auditing in the Public Sector

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  1. Risk Based Auditing in the Public Sector The Kenya Experiment ICGFM Miami Conference May 2006

  2. Risk-Based Audit Concept • A powerful audit methodology • Easily understood • Not so easily practiced • Useful accountability ‘tool’ • Best practice

  3. The Kenya Experiment • Partnership with the IIA • One pilot country - Kenya • Two pilot ministries • Phased approach • Decision points • Agreed follow-through plan

  4. Internal Audit Capacity Development in the Public Sector The Phased Approach • Phase 1 - Enlightenment • Phase 2 - Education • Phase 3 - Empowerment

  5. Phase 1 - Enlightenment Principles Adopted • Aim for the Top • It’s more about Management than IA • Partner with the Profession • Deliver one Message • Bank and IIA must demonstrate agreement • Use media to attract a wider audience • Identify a Leader - No success without local, credible IA leadership • Involve the Client • Manage Expectations

  6. Phase 1: Enlightenment - Activities High Level Forum on RBA Approach • Co-ordinate IAG/WB/IIA effort at a senior level • Minister of Finance and PS Finance engaged and active • Public invitation • Media presence • PS panel discussion

  7. Phase 1: Enlightenment - Impact • Minister of Finance ‘decrees’ RBA Approach for all government • PS’s ask to be part of expanded pilot • IAG credibility goes up • Appetite for RBA increases in IAG • IAG and IIA in national news • Decision taken to proceed with Phase 2

  8. Phase 2 - Education Principles Adopted • Classroom Training minimized • Keep interest level high • Peer Group only - Add a sense of competitiveness • Stakeholders included - Spread the message and the concept (i.e. C&AG and Treasury) • Emphasis on Hands-On training • Maintain maximum participation • Get hands ‘dirty’ from the start • Deliver a Product - Stretch the group (i.e. the product and the time constraint) • Involve the pilot Clients - Engage them throughout

  9. Phase 2: Education - Activities • Classroom Training • 2 day interactive workshop • High expectations set up front • Hands-On Learning • Work done in both pilot Ministries • Teamwork for 8 days (new for IAG) • Engagement with senior management and PS (new for IAG) • Products developed within time limit (new for IAG) • Delivery - RBA Plan for 2 Ministries presented to PS (new for IAG) • Management Input • PS challenges/ RBA plan revised (new for IAG) • IIA Workshops

  10. Phase 2: Education - Impact Importance seen of: • Applying IIA Standards • Working as a Team • Engaging with PS • Agreeing an Audit Plan with Management Value-add to PS: • Value ofRBA rather than pre-audit • Direct link of audit work to Management business objectives Need demonstrated for: • Nationwide audits – especially for Health • Linkage with Provincial auditors • Ongoing, hands-on support and leadership from IAG Appreciation that RBA: • Forces a fundamental ‘rethink’ of Audit activities • Requires ‘guts’ • Is a cultural change Decision taken to proceed with Phase 3

  11. Phase 3- Empowerment Principles Adopted • Keep Pressure Up - Without it, there is quick reversion • Support the Leadership - It is a lonely job • Instill a sense of Pride - Value-added work inspires and energizes • Maintain Oversight and Follow-up • Mid-course corrections are normal • Agreed actions need to be verified • Develop the IA Profession - Work in tandem with the Profession locally • Spread the Concept Cautiously - Demand builds up quickly and can overwhelm

  12. Phase 3: Empowerment - Activities • Review work to date – team effort • Reengage with Management • Teams brought together again • Audit Plans and initial audits reviewed • Discuss what works and what does not • Agree Follow-up Action • Provide Training and Insight • A mindset change is a process • Counsel and Encourage the IAG • It is a lonely job/ its not the only job • What to do about buildup in demand for RBA • Engage the Profession

  13. Phase 3: Empowerment - Impact • RB Audit Plans and audits start to emerge • Permanent Secretaries begin to buy-in - Management required to engage with IAG team • Auditors start feeling empowered • Engaging now with top management • Working in new spaces/places • Dealing with ‘real’ issues • Realizing hidden potential

  14. Initial Conclusions • Demand for RBA greater than expected • Govt. moving faster than expected • Mindset is changing • Auditors more focused on high risk issues • Need for training greater than expected • Auditors coming up with surprisingly useful results • Development Banks starting to see benefit of focused RBA

  15. Presenter and Consultant on the Kenya Experiment Graham Joscelyne CA(SA) CIA UHY Advisors, Inc. 1425 K Street, NW Washington DC 20005 202-296-2020 gjoscelyne@uhy-us.com

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