• Document: AUDIT COMMITTEES IN THE PUBLIC SECTOR
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AUDIT COMMITTEES IN THE PUBLIC SECTOR A DISCUSSION PAPER May 2012 by Noel HEPWORTH and Robert de KONING London, Brussels Copyright © Noel Hepworth and Robert de Koning 2012  Noel Hepworth is the former chief executive of the Chartered Institute of Public Finance and Accountancy (UK) and presently is an expert adviser to SIGMA on financial management and control; Robert de Koning recently retired from the European Commission DG Budget where he was team leader for PIFC issues. Their views expressed in this paper should not be construed as representative of any official policy. 1 Table of Contents ACKNOWLEDGEMENTS ................................................................................................................................. 3 EXECUTIVE SUMMARY .................................................................................................................................. 4 I. AUDIT COMMITTEES AND GOOD GOVERNANCE .............................................................................. 7 II. STANDARDS IN THE PRIVATE SECTOR ................................................................................................ 9 A. STANDARDS FOR THE AUDIT COMMITTEE ....................................................................................................... 9 B. STANDARDS FOR THE INTERNAL CONTROL SYSTEM ...................................................................................... 10 III. AN ANALYSIS OF THE DIFFERENT TYPES OF PUBLIC SECTOR AUDIT COMMITTEE – THE TYPES MOST COMMON IN THE POST 2004 MEMBER STATES OF THE EUROPEAN UNION ................................................................................................................................................................. 11 A. CENTRAL ADVISORY BOARDS (CABS) AND CENTRAL HARMONISATION UNITS (CHUS) ............................ 11 B. INTERNAL AUDIT MANAGEMENT COMMITTEES (IAMCS) ............................................................................ 13 C. AN IAMC COVERING SEVERAL ORGANISATIONS ......................................................................................... 15 IV. GOOD GOVERNANCE AUDIT COMMITTEES (GACS)..................................................................... 16 A. PRECONDITIONS FOR GOOD GOVERNANCE IN THE PUBLIC SECTOR ................................... 16 B. MAKING THE GAC EFFECTIVE ............................................................................................................. 18 V. CURRENT PRACTICE WITH PUBLIC SECTOR AUDIT COMMITTEES ....................................... 25 VI. INTRODUCING AUDIT COMMITTEES ................................................................................................ 28 CONCLUSIONS ................................................................................................................................................. 30 A. GOVERNANCE AUDIT COMMITTEES (GACS) ............................................................................................. 30 B. CENTRAL ADVISORY BOARDS (CABS) ......................................................................................................... 31 C. INTERNAL AUDIT MANAGEMENT COMMITTEES (IAMCS) .............................................................................. 31 D. FINAL REMARKS ........................................................................................................................................... 32 ANNEXES ........................................................................................................................................................... 34 ANNEX 1: THE SECRETARIAL ARRANGEMENTS SUPPORTING AN AUDIT COMMITTEE. ........................................ 34 ANNEX 2: THE MAIN ADVANTAGES AND DISADVANTAGES OF A GOVERNANCE AUDIT COMMITTEE................... 34 ANNEX 3: A GOVERNANCE AUDIT COMMITTEE AGENDA ................................................................................... 35 ANNEX 4: COUNTRY EXAMPLES BASED ON THE PRIVATE SECTOR MODEL. ........................................................ 36 2 Acknowledgements The authors are grateful for the advice and assistance they have had from colleagues and friends in preparing this discussion paper. In particular they would like to thank Jean-Pierre Garitte (Belgium), Wim Veldman (Netherlands), and Keeley Lund (CIPFA, UK) who have gone to a great deal of trouble in reading the scripts, offering advice and ensuring that references were up to date and appropriate. Nevertheless the opinions and conclusions set out are entirely our own. Robert de Koning Noel Hepworth

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