Strengthen corporate governance responsibilities for directors urges Chartered IIA
1 July 2019
The Chartered Institute of Internal Auditors have today (1st July 2019) called on Sir Donald Brydon’s Independent Review into the Quality and Effectiveness of Audit to recommend major changes to enhance the responsibilities of directors in relation to a company’s corporate governance to help reduce the risk of further Carillion-style corporate collapses.
If adopted the proposed changes could give directors of premium listed companies new responsibilities for:
- Ensuring their business has an internal audit function: We want the UK Corporate Governance Code to be strengthened with a new requirement for every premium listed company (approximately 1400) to have an internal audit function.
- Making a more explicit statement in respect of risk management and internal controls: By making it a regulatory requirement for company directors to sign a control risk self-assessment statement (CRSA). Some companies already do this, but it is not mandatory.
- Preventing and detecting fraud: If external auditors are also given additional responsibilities in this area. Directors could also be given responsibilities for finance, governance, risk management and internal controls.
Dr Ian Peters MBE, Chief Executive of the Chartered Institute of Internal Auditors said:
“Whilst it is clear measures are now required to improve external audit quality and effectiveness, we would observe that many of the recent high-profile corporate collapses associated with ‘external audit failures’ have also been characterised by significant corporate governance deficiencies.
So along with measures to improve external audit, we believe it is fundamental that company directors should also be given enhanced responsibilities for a company’s corporate governance.
Central to our proposals is our call for the UK Corporate Governance Code to be strengthened with a new requirement for all premium-listed companies to have an internal audit function. We believe this is vital in supporting company directors to ensure they have robust corporate governance processes in place.”
Notes to editors:
- Read our response to the Independent Review into the Quality and Effectiveness of Audit
- The Chartered Institute of Internal Auditors is the only professional body dedicated exclusively to training, supporting and representing internal auditors in the UK and Ireland.
- We have 10,000 members in all sectors of the economy.
- First established in 1948, we obtained our Royal Charter in 2010.
- Over 2,000 members are Chartered Internal Auditors and have earned the designation CMIIA.
- About 1,000 of our members hold the position of head of internal audit and the majority of FTSE 100 companies are represented among our membership.
- Members are part of a global network of 200,000 members in 170 countries, all working to the same International Standards and Code of Ethics.