KEYNOTE ADDRESS
2006 INTERNAL AUDITORS’ CONFERENCE
Holiday Inn
21st November 2006.
JOHN
NERO BAC (UPNG), MBA
(Qld)
OMBUDSMAN
OMBUDSMAN
COMMISSION OF
PNG
__________________________________________
INTRODUCTION
ADDRESS
VIP’S AND PARTICIPANTS –
• MINISTER FOR FINANCE & NATIONAL PLANNING, HON. JOHN HICKEY
• DEPUTY POLICE COMMISSIONER, MR. JIM WAN
• AUDITOR GENERAL, MR. GEORGE SULLIMAN
• PRESIDENT OF INSTITUTE OF INTERNAL AUDITORS’, MR. BERNARD KISEKOL
• DISTINGUISHED GUESTS
• LADIES AND GENTLEMEN
It gives me great
pleasure and honour to be here this morning to address you all in this second
annual conference of the Institute of Internal Auditors of Papua New
Guinea.
Ladies and gentlemen, it
is equally pleasing to note and acknowledge the Institute’s efforts and
contributions towards good governance in this country even at this early stage
of its existence and this conference is one such
example.
OUTLINE OF
PRESENTATION
In this
presentation, I wish to discuss some areas that you as auditors and accountants
and all of us for that matter in our respective roles as managers, advisors,
stewards and watch dogs should strive to address in the discharge of our various
duties.
Changes are happening
all around us and hence there is the need to be kept abreast of them. The
profession must be able to cope here in Papua New Guinea amidst all these
changes through the sharing of ideas and working
together.
THE AREAS I WISH TO
COVER INCLUDE: -
▪ Importance of Internal Auditing
▪ Audit Committees
▪ Professional Code of Ethics
▪ The Stakeholders
▪ Prevention Better than Curing
▪ Good Governance
▪ Ombudsman Commission’s Role
IMPORTANCE OF
INTERNAL AUDITING
Without
elaborating much on areas that will be better handled by experts in the sessions
that will follow, I wish to remind us all that Internal Audit is defined
as:-
"An
independent, objective assurance and consulting activity designed to add value
and improve an organisation’s operations. It helps an organisation
accomplish its objectives by bringing a systematic, disciplined approach to
evaluate and improve the effectiveness of risk management, control and
governance process".
This
definition gives me, a stakeholder, comfort and assurance to know that the
decisions made and actions taken by management are guided by advice including
those provided by Internal Auditors, whether in the public or private
sectors.
Despite the significant
role it plays, internal auditing I believe has not been given the prominence and
proper attention it deserves, particularly in the public sector. This is evident
in many agencies where either the Internal Audit Units do exist but are
inadequately resourced or are not in existence at
all.
This issue is now being
addressed by Government through the
Public Finances
(Management) Act which provides the
legal framework in Sections 9 (c) – (f) and 117 for the set up and
functioning of Audit Units and Audit Committees in all Government agencies that
receive grants from the state and for them to be subjected to audit by the
Auditor-General.
However, more
effort is still required for the effective input of internal auditors. These
include appropriate allocation of funds and resources by management,
uncontrolled independence and of course high degree of professionalism on the
part of internal auditors.
A
challenge therefore to the Institute, members and all concerned parties in your
various capacities is to assist in refocussing on internal auditing as one not
merely of inspection, reviewing and examination of internal controls and
processes to that also of assisting stakeholders in the better management of
their organisations through the discharge of professional advise on how to
conduct their business, management of risk and always endeavouring to find that
better way of improving systems, processes and controls in order to add value as
well.
This calls for
professional interaction and networking with parties outside your normal
environs including external auditors, internal auditors of other organisations
both in the private and public sectors, experts from other professions and
professional bodies.
AUDIT
COMMITTEES
Audit Committees are
required to be set up for all Government agencies receiving grants from the
state (PFMA
Sections 9, 69 & 117). One of the
primary roles of Audit Committees is to assist the Secretary and Chief
Executives and Management in achieving good corporate governance and should be
regarded as an important management
tool.
Three of the Audit
Committee members will include the respective Secretary or Chief Executive of
the agency, Secretary of the Department of Finance and the Auditor-General or
alternates. In no case should the representative be other than a Deputy
Secretary or a Deputy Auditor-General. The other members appointed should be
familiar with the general operational activities of the business and hold no
executive office within the department or
agency.
An issue that requires
review on Audit Committees from a practical operational perspective relates to
their composition.
The inclusion
of the Secretary of Finance and the Auditor-General or their alternates who must
be none than a Deputy Secretary or Deputy Auditor-General on Audit Committees
may be impractical
operationally.
This is due to
the high number of National Departments, Provincial and Local Level Governments
and other Governmental bodies that receive grants from the state that require
Audit Committees to be set up. To have these senior executives on all the Audit
Committees would result in most of their time attending to Audit Committee
commitments.
An alternative
arrangement to reduce the number of Audit Committees without losing
effectiveness is to take a sectoral approach. An example would be to set up an
Audit Committee for the Law and Justice Sector that would oversee the Police,
Correctional Services, Department of Justice and Attorney-General, Magisterial
Services, National Judicial Services and the Ombudsman
Commission.
I urge the Institute
to research this and other alternatives in achieving good corporate governance.
Please make your findings and recommendations known to the Finance Department as
to the viability of the sectoral
approach.
PROFESSIONAL CODE OF
ETHICS
The Institute of Internal
Auditors of Papua New Guinea has a Code of Ethics to guide and ensure members
conduct themselves in an ethical and professional manner. Internal Auditors and
other professionals must have high principles that must be translated into
proper practical applications.
These principles include:
-
▪ Integrity
Internal Auditors must have high integrity for it is upon this that others build their trust and confidence.
▪ Objectivity
Be objective and impartial in your judgement and assessments and do not be influenced by your own self interests and those of others.
▪ Confidentiality
As Auditors, your
stewardship role includes that of valuing and protecting information entrusted
to you and in your custody. Never disclose information without the proper legal
or professional need to do so.
▪ Competency
Part of being regarded as professionals is the requirement to possess the necessary skills, knowledge and qualifications to perform the duties as an Internal Auditor.
Professionals should always strive to excel in their respective roles.
As auditors, be it
external or internal or in the private or public sectors, a lot is expected of
you in the quality of your reporting, advise, conduct and in all your
representations. A lot is at stake and you are seen to be the comforters and
assurers.
Bear in mind that as
Internal Auditors and Accountants you do not represent yourselves but others as
well who are the stakeholders. I am sure if the above principles, which you are
already familiar with, are observed religiously in the profession will most
inevitably lead to the duty of care
concept.
THE
STAKEHOLDERS
On that note, who
then are the stakeholders?
Well,
believe it or not but the whole country are the
stakeholders!
The theme of the
conference is appropriately titled "Meeting Stakeholders
Expectations".
Stakeholders include the following:
-
▪ Government
▪ Departments or Agencies
▪ Provincial and Local Level Governments
▪ Creditors
▪ Debtors
▪ Overseas Missions and Foreign Nationals
▪ Donors – existing and potential
▪ Investors
▪ Tourists
▪ THE PEOPLE OF PAPUA NEW GUINEA
To meet the expectations
of all these stakeholders and a few others not mentioned above is a mammoth
task. That reveals the high expectations of
stakeholders.
What do
stakeholders expect?
In short,
stakeholders want the assurance and confidence that whatever the management and
those in authority are disclosing to them in one way or another, is based on
nothing less than the best advise and practices.
PREVENTION BETTER THAN
CURE
The commonly quoted saying
of "Prevention is better than cure" is an appropriate guide for the profession
which traditionally had been involved in investigating events after they had
occurred.
The current trend of
Internal Auditors striving to add value to and improve on processes of an
organisation’s operations comes hand in hand with the objective of
effective risk management and
controls.
It is therefore your
role to attract the attention of management to identify all potential risks and
then take preventive measures to minimise the occurrence of fraud, losses and
mismanagement of assets to name a
few.
GOOD GOVERNANCE
We hear a lot about law and
order problems in this country. However, I believe we have the laws in place
with order being the problem. Many people have not followed the laws by not
applying them as they are meant to
be.
Similarly, as auditors apply
the relevant laws in your work and ensure the laws governing the operations of
your respective agencies are being complied with. It is when the laws are not
followed in the order they should be that fraudulent and other unacceptable
events occur.
Good governance
depends on the ability by all concerned parties to understand and apply the laws
in place in order to achieve the desired outcomes they are intended
for.
In recent times a lot has
been revealed in the media and other reports of incidences involving the loss of
millions in Government assets including funds meant for services to the masses.
Government in its endeavour to
achieve good corporate governance embarked on some financial reforms that
include the Medium Term Development
Strategy.
I am confident that
the Institute is also doing everything within its powers to assist the
Government in this area and I commend you for
it.
OMBUDSMAN COMMISSION’S
ROLE
The Ombudsman Commission
applies the Organic
Law on the Ombudsman Commission and the
Organic Law on the
Duties and Responsibilities of
Leadership as part of its roles to
achieve good governance.
The
Commission either through complaints lodged by the public or on its own
initiative makes enquiries into allegations of maladministration in the public
sector. In many instances, these uncover some incidences of maladministration
and misapplication of Government assets. However, these are investigations that
are "after the event".
The
Constitution and the two Organic Laws also empower the Commission to issue
Directions to prevent certain events from occurring until clarifications are
sought which have resulted in savings to the
country.
In order to educate the
masses and the various Governmental bodies, the Commission also embarks on
external relations
programs.
With professional
bodies like this institute working together with other similar bodies as well
Governmental bodies such as the Ombudsman Commission, we will all be jointly
delivering to the
stakeholders.
CONCLUSION
In
conclusion, let me finish by saying that as auditors, accountants and
professionals in your respective fields, your professional conduct must not be
compromised. Always endeavour to perform your auditing and stewardship roles
with an attitude of honesty, confidence and professionally and stick to your
code of ethics as much as
possible.
It a mammoth task as
an auditor and a lot is expected of you but I have every confidence that the
Institute will deliver as it
matures.
Thank
you,
JOHN NERO