MODULE 4 ICPSK GUIDELINES ON GOVERNANCE AUDITOR ACCREDITATION

MODULE 4: ICPSK GUIDELINES ON GOVERNANCE AUDITOR ACCREDITATION COURSE

Module 4 : Contents l General Guidelines on the conduct of Audit l Qualifications, disqualifications, appointment and removal of a Governance Auditor l Term limit for Governance Auditor l Fees for Governance Audit services l Approaches to Governance Audit l Peer Review of Governance Audit l Duties and responsibilities of Governance Auditor

Module 4 : Contents (Ctd…) l Role of in-house CS in Governance Audit l Professional judgment, independence of judgment, accuracy of information and facts l Professional competence and due care, objectivity and integrity, disclosure and non-disclosure of information l The role of ICPSK in Governance Audit

Introduction to General Guidelines on the conduct of Audit l Governance audit guidelines are designed to guide governance auditors in the conduct of governance audits in accordance with Governance Standards issued by the Institute of Certified Public Secretaries of Kenya. l The principles set out in these Guidelines will be of general application to all governance audits but the audit approach will need to be tailored for specific organizations.

Appointment and Qualification l Governance auditor shall be appointed by the Board. l The auditors qualifications are as set from time to time by ICPSK which is the accrediting body. l Disqualification as a Governance auditor is as laid down in the by-laws governing the process. l The process of removal from office is as set out by the regulations.

Engagement and Client Acceptance The auditor will determine, address and ensure the following matter: l Considerations before accepting an audit engagement l Compliance with requirements for independence l Instances where governance audit engagement may be declined l Sources of information l Adherance to Professional Ethics and Conduct

Terms of Audit Engagements and Changes Thereto Engagement Letter/ Contract l The governance auditor and the client should agree on terms of the engagement, preferably prior to the commencement of the governance audit, in a governance audit engagement letter or other suitable form of contract. l Purpose, form and Contents of the Engagement Letter ( Refer to Governance Audit Guidelines)

Recurring/ Subsequent Re-appointment l The governance auditor does not need to send an engagement letter each year but should consider whether circumstances require the terms of the governance audit to be revised and whethere is need to remind the organization of the existing terms of the governance audit l However, it may be necessary to send a new letter in the following circumstances: -

Time of Appointment and Term Limits Time of Appointment l It is advisable that the governance auditor is appointed at the beginning of the financial year. A governance auditor should be reappointed annually Terms Limit l Term limits for the engagement of governance auditors may vary from time to time.

Governance Audit Fees l Determination of Audit fees to be charged on the assignment should mainly be driven by market fundamentals. l In order to ensure quality, the Institute may issue guidelines for consideration in arriving at fair pricing.

Requirements to attend meetings The governance auditor must ensure attendance of all requisite meetings with stakeholders in relation to the governance audit as agreed at the time of appointment and defined in the engagement letter.

Rights and Duties of the Auditor The powers and duties of the governance auditor shall be according to applicable laws, regulations or guidelines where defined and according to the letters of engagement for voluntary governance audits.

Assistance and facilitation of the Auditor It is the duty of the organization to give all assistance and enable access to facilities for the governance auditor in order to facilitate auditing governance and related records of the organization.

Key Governance Audit Areas a) Ethical Leadership and strategic management; b) Transparency and disclosure; c) Compliance with laws and regulations; d) Communication with stakeholders; e) Board independence and governance; f) Board policies, systems, practices and procedures; g) Consistent shareholder and stakeholder value enhancement; h) Corporate social responsibility and investment; and i) Sustainability.

Governance Audit Tool The governance audit will be conducted using a governance audit tool prescribed by the Institute. (NB: Refer to the Audit Tool for details)

Conducting Governance Audit: General Principles 1. Communication to the out-going Governance auditor; 2. Acceptance of Appointment; 3. Preliminary Discussions/Surveys and entry meeting; 4. Finalization of the Audit Plan and Briefing the Staff; 5. Testing, Interviews and Analysis; 6. Working Papers; 7. Management Representation Letter; 8. Audit Summary for Discussions; and 9. Submission of Governance Audit Report.

Duties and Responsibilities of a Governance Auditor l The Governance Auditor will be required to undertake a quality audit resulting in an assurance report; l The audit opinion should be evidence-based, arrived at following professionally independent judgment; l The auditor must possess competence and capacity, observe due care, objectivity and integrity; l The auditor must ensure confidentiality of the information; l Observe codes of ethics of a CS and requirements of CPS Act, CAP 534 and other applicable laws.

Communicating Audit Findings a) The governance auditor shall communicate to the organization matters of governance interest that arise from the governance audit. b) Management Letter l A management letter is used to communicate key weaknesses in governance and compliance issues that may have been noted during the course of the governance audit. Refer Appendix 3 in Audit Guidelines on content and follow up action of management letters.

The Governance Audit Report 1. Format of governance audit report 2. Signing 3. Reporting with Qualification 4. Grounds for Qualification 5. Explanations by the Board (Refer to Governance Audit Guidelines for details)

Governance Audit Peer Review l At the discretion of the Council of the Institute, governance audits and auditors may be subjected to peer review through a Governance Audit Peer Review Mechanism prescribed by the Institute. l The purpose of the peer review would be to improve quality in future audits.

Role of in-house Certified Secretary The responsibilities of the in-house Certified Secretary with regard to the governance audit shall include the following: a) Providing all necessary governance information and documentation; and compliance b) Facilitating effective communication between the organization, management and other stakeholders; c) Facilitating the governance auditor in the conduct of the governance audit; and, d) Coordinating the preparation of Governance Audit Self. Assessment Report.

Client’s Responsibilities An organization should prepare itself for the governance audit by taking the following steps: a) Putting in place a compliance Programme; b) Constituting a team responsible for governance compliance; c) Maintenance of proper Records; d) Preparation of Compliance Chart; e) Conduct Compliance Awareness Programmes; and , f) Giving all assistance and facilities to the governance auditor.

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