The development of the Internal Auditing function to

The development of the Internal Auditing function to combat fraud and corruption Martin Guozden CP, CPA, CISA, CCSA Office of the Auditor General Banco Interamericano de Desarrollo www. iadb. org

Agenda • IDB Group Systemic Framework against Corruption • Successful Internal Auditing Function • Regional Forums Banco Interamericano de Desarrollo 2 www. iadb. org

Systemic Framework against Corruption • Personnel Internal Policies • Procurement Policies • Bank’s General policies and guidelines Banco Interamericano de Desarrollo 3 www. iadb. org

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) Banco Interamericano de Desarrollo 4 www. iadb. org

Key Developments Affecting Internal Audit Key • Professional Practices Framework • Internal Audit Expectations • Components of a Successful Internal Audit Strategy Banco Interamericano de Desarrollo 5 www. iadb. org

Professional Practices Framework • Definition of Internal Auditing • Code of Ethics • Standards for the Professional Practice of Internal Auditing – Attributes – Performance – Implementation Guidance – Practice Aids – Evolving Issues Banco Interamericano de Desarrollo 6 www. iadb. org

System Components Interrelations Operational Objectives n l. I ia ra nc na p m Co Fi Activity 1 e Op e nc lia Monitoring Unit A Unit B Information and Communication Components Activity 2 m or nf l na it o io at Control Activities Risk Evaluation Control Enviroment Banco Interamericano de Desarrollo Per COSO Internal Control - Integrated Framework 7 www. iadb. org

Internal Control Process Per COSO Guidance for Smaller Public Companies Banco Interamericano de Desarrollo 8 www. iadb. org

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 Banco Interamericano de Desarrollo 9 www. iadb. org

Necessary Investments for a Successful Internal Audit Human Resources Technology Methodology Banco Interamericano de Desarrollo Knowledge Communications 10 www. iadb. org

The Evolution of Internal Audit Current State Compliance Auditing Internal Control Process Reviews Banco Interamericano de Desarrollo Desired State Operational Process Reviews Strategic Business Partner 11 www. iadb. org

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 Banco Interamericano de Desarrollo 12 www. iadb. org

Internal Audit Challenges and Barriers Internal Audit’s Challenges Common Barriers Future Successful Internal Audit Function • People Provide More Value • Methodology More Comprehensive Risk Coverage • Knowledge Operate More Efficiently • Technology • Communications Significant Investments Often Needed Banco Interamericano de Desarrollo 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 13 www. iadb. org

Regional Forums-Objectives • “Logical Frameworkshop” 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. Banco Interamericano de Desarrollo 14 www. iadb. org

Regional Forums - Participants Logical Framework Workshop • • Public Institutions – Technicians Special Guest Donor's community IIA, OLACEF, CAROSAI Forum on Internal Auditing • Logical Frameworkshop participants • Public Institutions – Authorities Banco Interamericano de Desarrollo 15 www. iadb. org

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 Banco Interamericano de Desarrollo 16 www. iadb. org

Questions Banco Interamericano de Desarrollo www. iadb. org