The Institute of Internal Auditors Malaysia (IIAM) and the Malaysian Institute of Corporate Governance (MICG) held their first joint virtual forum on Governance in Audit on 15 July 2021. Against the backdrop of the challenges presented by the Covid-19 pandemic, the Forum was themed “Audit’s Evolving Role in the New Normal”, and examined how organisations rely heavily on expert inputs from their Internal Audit (IA) teams to provide Boards, Audit Committees (ACs) and Management assurance that the Governance of their companies is not being compromised.
In her opening address, YBhg. Tan Sri Zarinah, Chair of the Institute of Corporate Directors Malaysia (ICDM), shared that IA’s role is key in a time of transformative change, and in the light of ongoing Corporate Governance (CG) concerns in Malaysia. IA is a crucial pillar of an organisation, and stakeholders are increasingly holding corporations accountable for ethical and sustainability lapses. These can severely impact an organisation’s reputation and license to operate in the long term. Boards must give due recognition to the importance of IA in helping provide assurance on risks and internal controls, by establishing an open channel for regular communication and direct feedback. IAs must be able to provide Independent Non-Executive Directors (INEDs) with timely updates, especially when there is a need to flag ethically questionable behaviour in the organisation.
Datin Seri Sunita Rajakumar from Climate Governance Malaysia shared that IA can help convey to investors the assessment of how climate change affects a company’s operations and its accounts, and test the appropriateness of the assumptions made. Boards are accountable to stakeholders and need the right IA expertise and to assist with addressing climate change issues, especially in this VUCA (volatility, uncertainty, complexity, and ambiguity) environment. MICG Deputy President, Mr. David Berry shared that integrity throughout the organisation is a key principle expected to be applied and upheld by Internal Auditors. He suggested that a Code of Conduct be prepared with IA’s collaboration as a playbook for an ethical corporation.
En. M. Nazri Muhd, President/ Chief Executive Officer, MyFinB Group, mentioned that auditors can work smarter by using AI to optimise their time, and enable them to use their human judgment to analyse a broader and deeper set of data and documents. Mr. Jason Yuen, Partner Technology Consulting, E&Y Malaysia shared that IA has a critical role in helping organisations in the ongoing battle of managing cyber threats, both by providing an independent cybersecurity assurance assessment of existing and needed controls, and helping ACs and Boards understand and address the diverse risks of the digital world.
The Panel discussion, moderated by Mr. Santosh Govind (Chief Audit Executive, Eco World International Berhad), included Ms. Marzida Binti Mohd Noor (INED Affin Bank Berhad), Ms. Christina Foo and Mr. Lee Min On (both INEDs of several main market listed issuers) and YBhg. Dato’ Seri Johan Raslan (Director, Audit Oversight Board Malaysia). They agreed that IA’s role is to provide independent assurance over organisational readiness to face its governance and operating risks. The task is based on real time and dynamic risk assessments by leveraging off data and advanced technologies. Currently, the IA role is not defined in the listing requirements or the Malaysian Code of Corporate Governance. The only available definition is in the professional Institute of Internal Auditstandards, making it difficult for the AC to fully understand what can be expected of IA. Going forward, however, stakeholders may increasingly question the effectiveness of IA, when corporate issues emerge. Key areas to address are the training of AC members and active communication between the IA team and the AC Chair and members. Mr. Santosh closed the panel by emphasizing that “CAT” –competency and skills, approach (focus on risks) and agile, technology (auto tools) were key areas for the IA teams.
In his closing speech, End. Zainal Akbar Abdul Kader, President of IIAM reiterated importance of IA to embrace change and deliver assurance on the governance of companies. Given the volatility of the current environment, there are growing governance demands for the IA profession to be equipped with the right skills and mindset to keep evolving and transforming itself in this new normal.