The Chartered IIA's discussion paper on corporate governance reform provides internal auditors the chance to help shape our approach to corporate governance in the context of our work on the FRC Stakeholder Panel and more widely in the coming months.
For the last decade, the Chartered IIA has contributed to the debate around defining and moving towards best practice for corporate governance. Internal audit plays a crucial role in contributing to an organisation’s sound corporate governance. Consequently, the Chartered IIA has a strong interest, and seeks to support internal audit professionals to fulfil their role through our professional practice and guidance work. With a strong relationship with government, regulators, business and other sectors, we are well placed to promote the crucial role of internal audit in the corporate governance regime.
The Chartered IIA presents eleven policy proposals under three areas:
The definition of corporate governance
Corporate governance reform in the UK
2. Large private companies should be expected to follow a corporate governance code.
3. Section 172(1) of the Companies Act 2006 should be reformed to create a positive obligation on directors to mitigate adverse impacts on stakeholders, not just shareholders.
4. Secondary legislation should be introduced stating that all listed companies are required to ‘comply or explain’ with all sections of the Corporate Governance Code and detail appropriate enforcement mechanisms.
5. Directors should be held to account through a more effective enforcement regime when they fail to meet their responsibilities.
Updating the UK Corporate Governance Code
6. The UK Corporate Governance Code should be updated to provide greater clarity and simplification of principles and provisions.
7. Internal audit should be recognised as one of the integral elements of good corporate governance in the UK Corporate Governance Code.
8. The role of internal audit should be explicitly stated in the UK Corporate Governance Code.
9. All companies should be required to have a Code of Ethics for staff to sign at the beginning of their employment and this be stipulated in the Code.
10. The FRC’s Guidance on Audit Committees should state that heads of internal audit must report to the chair of the audit committee.
11. The FRC’s Guidance on Audit Committees should provide a direct assertion of the independence of the internal audit function.
The Chartered IIA will be hosting six regional events to discuss the policy proposals and how different internal audit departments audit governance.
The events will be taking place in:
To book or find out more information click here.
You are invited to comment on the questions summarised in Appendix B of the discussion document.
Responses can be submitted in two ways:
Issued Tuesday 10 October 2017
Responses by Friday 1 December 2017