ISLAMABAD, Sept 8: Chairman, Securities and Exchange Commission of Pakistan, Dr Tariq Hassan, here on Monday highlighting the role of internal audit in monitoring the operations of a company said it saved it from avoidable risks in an uncertain environment.
He was speaking as chief guest at a seminar on “Internal Audit - Current Best Practices” arranged by the Institute of Cost and Management Accountants of Pakistan (ICMAP).
“At a time when the business community, their advisers and regulators are looking for preventive measures to avoid corporate collapses, a strong, independent internal audit, which performs its functions in an objective manner, is the solution along with strengthening the governance procedure,” he remarked.
Stressing that internal audit should be an independent and autonomous activity, he said the internal auditor acts like the conscience of the entity.
The external auditor only gets a change once a year to review the business operations and financial statements of its client. Similarly, a regulatory authority is dependent on periodic statements for monitoring and regulating.
An internal auditor, on the other hand, is in a much better position to monitor and review the business processes, operations, financial statements and associated risks on a continuing basis.
This category of audit, at the same time, helps the management to accomplish its objectives by bringing a systematic, disciplined approach based on an objective evaluation of the effectiveness of risk management, control and governance processes with a view to improving the same.
These three areas of risk management, internal controls and corporate governance, Dr Hassan pointed out, were becoming ever more important in the face of corporate failures throughout the world.
In Pakistan, prior to the introduction of the Code of Corporate Governance issued in March 2002, he observed, there was no mandatory requirement on listed companies to establish an internal audit function.
Emphasising the importance the SECP attached to the internal audit function in any company, he said the Code necessarily required all listed companies to institute an internal audit function, the head of which should have access to the chair of the Audit Committee.