1. “How can audit committees ensure that they derive value from their internal audit function”.

2. Page 2 Introduction 5 th Annual Audit Committee Conference Audit Committees and Internal Audit face various challenges in today’s world ► It matters how we respond to these challenges ► Are the priorities between the AC and the CAE in sync ?

3. Page 3 For the AC to derive value from IA: Internal Audit Leadership – CAE Internal Audit Mission and Mandate Audit Committee relationship with the CAE Measuring IA Performance CAE expectations of the AC 5 th Annual Audit Committee Conference

4. Page 4 IA Leadership - CAE

5. Page 5 Internal Audit Leadership- CAE ► Appointment and dismissal ► Reporting line and independence ► Attributes the CAE must possess Dynamic communication skills / effective communicator Business acumen Excellent grasp of business risks Gift for developing talent Unflinching integrity and ethics Strategic thinker  Develop the CAE profile before recruitment 5 th Annual Audit Committee Conference ► “The successful CAE is somebody with real business acumen and operational experience. You need to know what it’s like to run a business and make all the decisions and operational trade-offs leaders make every day.”-Brian Worrell, CAE General Electric

6. Page 6 Internal Audit Leadership- CAE Emphasis on communication skills Successful CAE’s Customise communications Deliver clear, concise and insightful messages Are frank, transparent and comfortable Communication fosters stronger relationships with Audit Committee Executive Management Other stakeholders “Boards want someone who is a good communicator and won’t sugarcoat or pull punches on important issues. It’s important that our messages are delivered clearly, whether written or oral, so people can understand the magnitude of an issue; is it a rock or a pebble?”Paul Sobel, CAEMirant Corporation 5 th Annual Audit Committee Conference Communication challenges Reports are too voluminous or not well-written Too many reports or too much content Limited/inadequate formal communication Ineffective delivery of presentations No synthesis of internal audit results Management perception of CAE and IA

7. Page 7 5 th Annual Audit Committee Conference What does this research tell you? Moving toward Trusted Advisor status involves personal and collective growth into many of the ‘soft spots’ identified in the research

8. Page 8 IA Mission and Mandate

9. Page 9 IA Mission and Mandate Review the IA Function’s Mission and Mandate Understand the role of IA Difference between IA and external audit Combined assurance Balance between Assurance and Consulting Tone at the top Unlimited access to information and employees 5 th Annual Audit Committee Conference

10. Page 10 Audit Committee relationship with the CAE

11. Page 11 Audit committee relationship with the CAE Visible support Facilitate adequacy of IA resources Regular meetings with the AC Chair Closed meetings with CAE Appointment and dismissal of the CAE Performance evaluation of the CAE Repeat audit findings kpi’s in management’s scorecards AC and CAE – Are they in sync? If not how do we bridge the gap? 5 th Annual Audit Committee Conference

12. Page 12 Measuring IA Performance

13. Page 13 Consider the following in evaluating IA Performance Is Internal Audit a trusted advisor Is the CAE respected by management Partnership vs policing audit approach IA recommendations – are they implemented IA knowledge of the business Follow-up audits and Repeat findings Is the Internal audit plan aligned to business objectives “ It is essential to have a great understanding of the business. If you don’t, your job can be pretty hard. You need systemic thinking, the ability to connect the dots and understand the implications and consequences of business decisions in order to utilize resources in the most effective way.”Connie McDaniel, CAEThe Coca-Cola Company 5 th Annual Audit Committee Conference

14. Page 14 Consider the following in evaluating the IA Does the CAE provide value adding advise Are IA recommendations implemented Is IA taken seriously Does Management approach IA for input and advice 5 th Annual Audit Committee Conference Being ‘audited’ for many people can be perceived as an uncomfortable experience. Is the CAE a strategic partner?

15. Page 15 Partnership or Policing audit approach 5 th Annual Audit Committee Conference How is IA perceived?

16. Page 16 Focus on the AC

17. Page 17 CAE expectations of the AC Reasonable understanding of the business Invest sufficient time in reading and understanding IA reports Offer ongoing visible support to the CAE Composition of the committee Independence of the committee Understand the role of IA AC annual evaluation 5 th Annual Audit Committee Conference

18. Page 18 Conclusion Are you deriving value from your IA function? Does your IA function only exist for compliance purposes? Are you visibly supporting the IA function? 5 th Annual Audit Committee Conference

19. Page 19 ► Q & A