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A QAR Application in Turkey and Sharing the Experiences Stefano Perazzini Özge Aşçıoğlu İstanbul A QAR Application in Turkey and Sharing the Experiences Stefano Perazzini Özge Aşçıoğlu İstanbul 09/11/2007 1

AGENDA § § § § Overview of Uni. Credit Overview of Yapı Kredi Bank AGENDA § § § § Overview of Uni. Credit Overview of Yapı Kredi Bank Our Vision Why are companies interested in Quality of Internal Audit? Requirements of IIA What is QAR Internal and External Assessments Why Deloitte Work plan Phase 1 _ Quick Check Phase 2 _ Remediation (performed by KFS Internal Audit) Phase 3 _ Detailed Review by Deloitte Phase 4 _ Assessment and Benchmark with Best Practices Phase 5 _ Overall Conclusion and Final Report 2

UNICREDIT Uni. Credit at a Glance • Uni. Credit Group is one of the UNICREDIT Uni. Credit at a Glance • Uni. Credit Group is one of the largest banking and financial services organisations in Europe with a network of 9, 000 branches and strong local roots in 23 countries. Its international network is made of branches, representative offices and small banking subsidiaries in 50 countries worldwide. • In Europe we are one of the leaders in terms of business size and we can leverage on a unique strategic positioning. The Group is, in fact, leader in one of the richest areas of Europe: Bavaria, Austria and Italy as well as in Central and Eastern Europe, an area featuring fast rates of economic growth and the fastest growth rates for banking revenues. 3

UNICREDIT 4 UNICREDIT 4

OVERVIEW OF YAPI KREDİ BANK • • • Yapı Kredi Bank at a Glance OVERVIEW OF YAPI KREDİ BANK • • • Yapı Kredi Bank at a Glance One of the most dynamic and experienced institutions in Turkey created from the successful legal merger on the 2 nd of October 2006, With total assets of YTL 47. 8 billion (approx. USD 34. 7 billion) as of June 2007 As per ownership structure, 80. 2% of Yapı Kredi is controlled by Koç Financial Services A. Ş. (“KFS”) – the 50/50% joint venture between Uni. Credit and Koç Group the Bank serves its over 13 million customers through approx 650 branches throughout the country and various alternative distribution channels strong domestic presence including domestic financial subsidiaries; Yapı Kredi owns subsidiary banks in the Netherlands, Russia and Azerbaijan. 5

YKB ORGANIZATION CHART AUDIT COMMITTEE CREDIT COMMITTEE Board of Directors INTERNAL AUDIT INTERNAL CONTROL YKB ORGANIZATION CHART AUDIT COMMITTEE CREDIT COMMITTEE Board of Directors INTERNAL AUDIT INTERNAL CONTROL COMPLIANCE OFFICE RISK MANAGEMENT GM MANAGEMENT COMMITTEES COO CORPORATE IDENTITY AND COMMUNICATION PRIVATE BANKING AND INTERNATIONAL RETAIL BANKING CREDIT CARDS AND CONSUMER LENDING OPERATIONS CORPORATE BANKING ALTERNATIVE DISTRIBUTION CHANNELS FINANCIAL PLANNING, ADMINISTRATION AND CONTROL (CFO) LEGAL LOGISTICS AND COST MANAGEMENT HR COMMERCIAL BANKING ORGANIZATION IT TREASURY CREDIT MANAGEMENT 6

INTERNAL AUDIT DEPARTMENT ORG CHART 7 INTERNAL AUDIT DEPARTMENT ORG CHART 7

INTERNAL CONTROL UNIT ORG CHART 8 INTERNAL CONTROL UNIT ORG CHART 8

OUR VISION Our vision is to become “A World Class” Internal Audit Function at OUR VISION Our vision is to become “A World Class” Internal Audit Function at KFS level in order to satisfy expectations coming from various stakeholders and counterparties: Audit Committee, Board of Directors, Top Management, Shareholders, Supervisory Bodies, External Auditors, etc. 9

WHY ARE COMPANIES INTERESTED IN QUALITY OF INTERNAL AUDIT? • IIA Standards require companies WHY ARE COMPANIES INTERESTED IN QUALITY OF INTERNAL AUDIT? • IIA Standards require companies to have an “independent” quality assessment every five years, effective since January 2002 – Increased responsibility of, and focus on, Audit Committees – Audit Committee increasing their reliance on IA for regulatory requirements, risk management – Increased focus on corporate governance and fraud prevention • More focus on audit activities from executive management and regulators 10

REQUIREMENTS OF THE INSTITUTE OF INTERNAL AUDITORS 1310 Quality Program Assessments • The internal REQUIREMENTS OF THE INSTITUTE OF INTERNAL AUDITORS 1310 Quality Program Assessments • The internal audit activity should adopt a process to monitor and assess the overall effectiveness of the quality program. The process should include both internal and external assessments. 1311 Internal Assessment • It should include ongoing reviews of the performance of internal audit activity and periodic reviews performed through self assessments or by other persons within the organization with the knowledge of internal auditing practices and the standards. 1312 External Assessment • “External assessments, such as quality assessment reviews, should be conducted at least once every five years by a qualified, independent reviewer or review team from outside the organization. ” 11

WHAT IS QAR • A Quality Assurance Review (QAR) is a strategic assessment of WHAT IS QAR • A Quality Assurance Review (QAR) is a strategic assessment of an internal audit function, including its infrastructure, staff experience, and performance relative to business goals, "best practices", and applicable standards. • QAR evaluates compliance with the Standards, the internal audit activity and audit committee charters, the organization’s risk and control assessment, and the use of successful practices. 12

INTERNAL AND EXTERNAL ASSESSMENTS External Internal Full QAR Ongoing and Periodic 13 INTERNAL AND EXTERNAL ASSESSMENTS External Internal Full QAR Ongoing and Periodic 13

INTERNAL ASSESSMENTS ONGOING • CONTINUOUS MONITORING • CAE SUPERVISION • AUDITEES’ FEEDBACK PERIODIC • INTERNAL ASSESSMENTS ONGOING • CONTINUOUS MONITORING • CAE SUPERVISION • AUDITEES’ FEEDBACK PERIODIC • AUDIT OF THE AUDIT PROCESS • SELF-ASSESSMENT • OTHER COMPETENT PERSONS 14

EXTERNAL ASSESSMENTS QUALIFIED INDEPENDENT REVIEWER • • ALTERNATIVE METHODS Certified Audit Professional Well versed EXTERNAL ASSESSMENTS QUALIFIED INDEPENDENT REVIEWER • • ALTERNATIVE METHODS Certified Audit Professional Well versed in the Standards and leading practices Reasonable experience at management level Results to be shared with the Audit Committee and Top Management • Non-reciprocal assessment • Self-assessment with external validation KFS Audit applied this External Assessment 15

THE STRUCTURAL ELEMENTS OF A QAR ON INTERNAL AUDIT FUNCTION Supporting Processes Activity organization THE STRUCTURAL ELEMENTS OF A QAR ON INTERNAL AUDIT FUNCTION Supporting Processes Activity organization Human Resources and management Vision, values, & strategic objectives Constitution of a team of experts Structure and organisation (Processes / Methods) Recruitment Resource management Training and personal development Information Technology Electronic management system of work files Specific applications and technologies Database of best practices Activity measurement Internal communication Individual evaluations Production Processes Planning Mapping of company risks Knowledge of internal audit clients expectations Internal audit plan Coordination with external auditors and other control entities Resources assignment Remuneration Satisfying Perfectible Need for Not applicable Out of scope Not applicable improvement The elements in a shaded color frame appear in the IIA (Institute of Internal Auditors)16 professional standards Performance Communication and reports Information on objectives and expectations for each mission Communication / Reporting to audited entities Collaboration with the audited entity Needs for expertise evaluation and responses to main issues Work Program Tests and analysis Work documentation Engagement supervision Follow up Communication / Reporting to management Communication / Reporting to audit committee Communication with external auditors and other control entities Internal audit clients satisfaction measurement

WHY • Deloitte has a sound background in performing Strategic Quality Assessment of Internal WHY • Deloitte has a sound background in performing Strategic Quality Assessment of Internal Audit activities for European and global companies. They have been providing the Internal Audit community with services to enhance its overall performance since they initiated their Internal Audit Services practice more than 20 years ago. 17

DELOITTE TEAM JEAN-PIERRE GARITTE Quality Assurance Partner OKTAY AKTOLUN Delivery Partner EVREN ALTUNAY Engagement DELOITTE TEAM JEAN-PIERRE GARITTE Quality Assurance Partner OKTAY AKTOLUN Delivery Partner EVREN ALTUNAY Engagement Director NACİYE KURTULUŞ TUBA İNCİ Assistant Manager 18

WORK PLAN • Phase I / Quick Check - January 8 th – January WORK PLAN • Phase I / Quick Check - January 8 th – January 17 th – High level review of risk assessment approach, Internal Audit Charter and entire audit process is performed – Interview with one of the members of the Audit Committee – Results are discussed with Senior Management of the Internal Audit Department • Phase II / Remediation - January 17 th –May 30 th – Internal Audit Department based on the quick review results redesigned process, improved documentation standards and initiated other improvement activities as necessary • Phase III / Detailed Review - June 4 th- July 14 th – An in-depth review of the Internal Audit function is performed and a representative sample of Internal Audit projects is tested – Specific survey formats for KFS are developed and results of them are reviewed to address unique needs and objective of this project 19

WORK PLAN • Phase IV / Assessment and Benchmark with Best Practices - June WORK PLAN • Phase IV / Assessment and Benchmark with Best Practices - June 4 th. July 14 th – Charter, mission statements, organizational structure, span of controls, personnel credentials and education levels, training policies, performance appraisal process, and recruiting policies are reviewed – Risk assessment, quality control, self auditing and follow up activities are analyzed – Comparisons / benchmarking with leading practices on superior performance areas • Phase V / Overall Conclusion and Final Report – July 15 th - July 23 rd – Main strengths and weaknesses are identified and gap analysis between current situation and IIA standards is formalized – Opportunities for improvement are identified and recommendations are issued 20

PHASE II REMEDIATION (PERFORMED BY KFS INTERNAL AUDIT) • Based on the project timeline, PHASE II REMEDIATION (PERFORMED BY KFS INTERNAL AUDIT) • Based on the project timeline, approximately 20 volunteer auditors are involved in several sub-projects that were completed succesfully by the end of May, 2007. 21

PHASE III DETAILED REVIEW BY DELOITTE AND PHASE IV ASSESSMENT AND BENCHMARK WITH BEST PHASE III DETAILED REVIEW BY DELOITTE AND PHASE IV ASSESSMENT AND BENCHMARK WITH BEST PRACTICES • Performed interviews including board members, audit committee members, top management, external auditors, corporate audit and internal auditors • Conducted two separate surveys; one to clients (audit committee, board members and auditees) and the other to the internal audit staff. • Examined working papers of selected sample audits • Reviewed Risk Assessments and Audit Plans • Reviewed IA Charter and regulation • Examined communication with auditees, Audit Committee, external auditors and management • Reviewed electronic document management systems • Facilitated participation to web-based IIA Benchmark questionnaire GAIN and analyzed the results • Examined KFS IA Dept based on Deloitte methodology that describes processes and sub-processes according to the IIA standards. 22

PHASE V OVERALL CONCLUSION AND FINAL REPORT • KFS Internal Audit generally conforms to PHASE V OVERALL CONCLUSION AND FINAL REPORT • KFS Internal Audit generally conforms to the Standards for the Professional Practice of Internal Auditing prescribed by the Institute of Internal Auditors. • Other possible results: – Does not confirm – Partially confirms 23

LIST OF ORGANISATION WITH COMPLETED EXTERNAL ASSESSMENTS 24 LIST OF ORGANISATION WITH COMPLETED EXTERNAL ASSESSMENTS 24

IN THE PRESS 25 IN THE PRESS 25

PROJECT TEAM THANK YOU FOR YOUR ATTENTION 26 PROJECT TEAM THANK YOU FOR YOUR ATTENTION 26