Keynote Speech By Tan Sri Dato' Setia Haji Ambrin bin Buang
Auditor General of Malaysia
40th Meeting of the Representatives of Internal Audit Services
of United Nations Organisations, Multilateral Financial Institutions
and Associated Intergovernmental Organisations.
Prince Hotel and Residence Kuala Lumpur, 1 October 2009
Mr. Kamal Malhotra
United Nations Resident Coordinator for Malaysia and UNDP Resident Representative for
Malaysia, Singapore and Brunei Darussalam
Mr. Egbert C. Kaltenbach
Director of the UNDP and Chairperson of RIAS
Distinguished Delegates, Ladies and Gentlemen
A very good morning to you all
First and foremost, allow me to record my appreciation to the Office of Audit and Investigations,
UNDP for your gracious invitation to have me to address you this morning on the 40th Meeting
of the Representatives of Internal Audit Services of United Nations Organisations, Multilateral
Financial Institutions and Associated Intergovernmental Organisations. It is indeed a pleasure to
welcome such a distinguished group like yourselves to Malaysia. I am happy that I have had the
opportunity to spend time with you last evening at the welcome dinner, which I immensely
enjoyed.
Internal Audit is a critical function of any organisation; providing a systematic, disciplined
approach to evaluating and improving the effectiveness of risk management, control, and
governance processes. As such, it is thus heartening to note that all UN agencies and the
Multilateral Banks are coming together to harmonize practices and achieve synergy, in addition
to discussing and exchanging global best practises in order to innovate and add value to our
profession and respective organisations. We in Malaysia, and the National Audit Department
(NAD) in particular are always keen to learn and adopt best practices mainly because the NAD
supply the bulk of internal auditors in Malaysian government ministries, departments and
agencies.
Ladies and Gentlemen,
I would like to take this opportunity to apprise you on recent developments in auditing in the
Malaysian public sector.
Being the legally appointed body responsible to audit all the government ministries, departments
and agencies as required by the constitutional mandate, the NAD’s role is to promote public
accountability through impartial and objective examination, review and reporting on accounts
and operations of government. We audit government operations and provide information that
helps Parliament hold the government to account for its stewardship of public funds.
I am happy to mention here that the Malaysian government has responded positively to growing
public demand for greater accountability and transparency in the public service by strengthening
the staffing of the NAD as well as the various internal audit divisions of ministries, departments
and agencies. The various positions in the Internal Audit Divisions (IADs) have been made
cadre posts, whereby the NAD is empowered to supply the bodies and plan for their career
development as well as training needs. Majority of the heads of IAD posts have been upgraded,
meaning senior and more experienced personnel are now manning the IAD, in the hope that they
can play a more effective role than before.
As for the NAD, last year with a staff of 2,100, we conducted financial audits on 447 financial
statements of the Federal and States Governments, Federal and State Statutory Bodies, Local
Governments and Islamic Religious Councils. We are also entrusted to audit projects funded by
United Nations organisations, World Bank and so forth. In addition, we carry out 278
compliance audits based on the newly established Accountability Index (AI) and 160
performance audits on the government ministries, department and agencies at the Federal and
States levels. For the record, we had conducted performance audits on 496 government
companies starting from 2004.
As with many other countries, the NAD discharges its constitutional duty to its major
stakeholders by providing timely, independent and objective reports. Parliament, the
government and the public service are the guardians of the public funds entrusted to them for
delivering programs and services to benefit the people. A key element of the people’s
confidence in our democratic institutions is their belief that public funds are being spent wisely
and effectively. By helping MPs to discharge their duty as our representatives and assisting the
government in the management of public funds, the National Audit Department (NAD) therefore
plays an important role in the functioning of our parliamentary system. It is our duty to monitor
that the management of, and accounting for, public funds are done in an economic, efficient and
effective manner.
Our reports are examined by the Public Accounts Committee and the Committee holds hearings
throughout the year, which I attend, along with my audit team and senior public servants from
the audited departments. After the hearings, the Committee may report and make
recommendations to Parliament, and the audited departments are generally expected to report
back to the Committee on what they have done in response to our recommendations.
Distinguished Guests, Ladies and Gentlemen
The Auditor – General of Malaysia is given a very wide mandate—one that is becoming ever
more complex as government changes its structures and practices to deliver programs and
services to the people more expeditiously and efficiently. The goal for the NAD of Malaysia is to
become more stakeholder focused and to deliver value in the audit services we provide. To
achieve this goal, I would like to share with you our priorities over the next several years which
are as follows:
·
Performance auditing and special investigations will become the most important part of
our work in the coming years. The selection of performance audits in the coming years will take
into account the government current economic stimulus packages and aligning the audits to the
recent announcement of several National Key Result Areas (NKRAs) by the government. For
your information, the Malaysian government has identified 6 NKRAs i.e enhanced public safety,
war on corruption, enhanced robust education systems, improving low income household,
improving rural basic infrastructure and improving urban public transportation in line with the
One Malaysia, People First, Performance Now concept where outcome and impact of
government programs in these areas will be evaluated on a continuous basis.
·
In line also with greater emphasis on performance in the public sector, the NAD will pay
greater attention to the performance of government companies. The audits normally concentrate
on the corporate strategic planning, corporate governance and management of resources/assets,
finances and activities. We observe that some of these companies have been in existence for so
many years but because of weak corporate governance, their performance is at best mediocre and
sometimes burdensome to the government.
·
We have recently introduced the Accountability Index (AI) on Financial Management
which was first reported in 2007 Auditor – General Report. The rationale of introducing the AI is
to respond to the concern of Government leaders over the instances of non-compliance and
internal control weakness that were repeatedly mentioned in the annual audit reports. As an audit
innovation, the AI seek to provide an objective, analytical, comprehensive and transparent
assessment of the financial management compliance of government ministries, departments and
agencies where their overall financial management performance is star- rated from weak to
excellent. We are pleased to note that the results of the 2008 AI assessment indicated a marked
improvement with 100% more Federal and State ministries and departments obtaining excellent
financial management compliance as compared to 10 ministries and departments in 2007.
·
We also intend to intensify our work on a few areas that we have recently embarked for
example, environmental and water management auditing. These are issues which are so close to
the lives of our people. Specialised units are established at the NAD to conduct the audits and
consultants are enlisted to assist in the performance of the audits.
·
Continuous staff professional training to ensure that auditing standards of the highest
quality are maintained at all times is another priority. The National Audit Academy has been
given the responsibility of identifying training needs for new recruits and also for career
development. Apart from the courses conducted in – house, audit officers have also been given
opportunities to attend courses conducted by professional accounting and auditing bodies,
ASOSAI and INTOSAI.
·
The shift from manual to computer audit would certainly lead to more effective use of
human resources. As such, in order to maintain credibility and professionalism, the NAD has to
embark on latest techniques of auditing. Serious efforts have been taken to develop and modify
computer audit software packages to suit the needs of the NAD. This software packages are
being developed and tested with the assistance of specially trained staff.
Ladies & Gentlemen,
The role of internal audit as a cornerstone of corporate governance whether in the private or
public sector cannot be overemphasized. The International Standards for the Professional
Practice of Internal Auditing (Standards) acknowledge the close link between corporate
governance and the practice of internal auditing, suggesting the work related to corporate
governance is fundamental to the basic practice and performance of the internal auditing
function.
When we speak of corporate governance, it is essential to look at performance beyond
conformance; at substance over form meaning using the governance arrangements to meet the
stakeholders’ expectations of honesty and accountability and to enhance the overall performance
to deliver value for the shareholders. Internal auditors as the in – house regulator must be
particularly vigilant about form undermining substance. Boards are often more focused on
conformance, concentrating on box ticking exercise whilst ignoring the spirit and substance of
laws, rules and codes.
This is often seen for example in the appointment of independent directors where often such
directors, while outwardly appearing independent based on the legal criteria of relationship, are
often beholden to the organisation or its chief executive, thus, interfering with their ability to
exercise independence management or to act in the best interest of the stakeholders. This is not
to say that conformance is irrelevant but mere conformance is inadequate. Indeed organisations
need to achieve both conformance and performance and not to trade one off against the other.
An effective committee is an indication of best practice and reinforces the independence and
objectivity of the internal audit units. Internal auditors must ensure the effectiveness of the audit
committee which is an integral part of an effective audit function. The importance of the
committee is one of the issues raised in 2007 Auditor – General’s Report relating to the audit
study on the effectiveness of Internal Audit Units among ministries and departments at the
Federal and States levels. Our study revealed that audit committees were not established and
some did not function effectively. Though Audit Committees are a recent development in the
public sector, their very presence reflects an increasing emphasis on accountability and financial
performance.
As you are all aware, the impact of the global economic crisis has been felt across a broad range
of industries as well as professions and auditing profession is no exception. The economic
downturn is challenging us to continue delivering value and help the auditees or clients to meet
their objectives, but under tighter resource constraints. I believe that the internal auditors can
help during this period by using an integrated approach to governance, risk and compliance
(GRC) to develop the right control environment and provide reasonable assurance. By
strategically integrating GRC, the organisation can gain the ability to manage risks more
effectively and create competitive advantage.
Distinguished Delegates, Ladies & Gentlemen,
Let me share with you our connections with the internal auditors in Malaysia. I am convinced
that we can better leverage our collective efforts and expertise as a community through sharing
knowledge and learning from one another. I believe it is important that communication flow
freely between the NAD and the internal audit units. As such, the NAD has close coordination
with the Internal Audit Units in the preparation of programmes and exchanging of audit
findings. Internal auditors are our strategic partners and making full use of their work will reduce
the extent of audit works and avoid duplication of work.
The NAD assists the internal audit units on the capacity building. Training programmes,
seminars and symposium are conducted from time to time at the National Audit Academy
(NAA) to enhance the knowledge and practical skills of internal auditors as well as to share
experience on auditing. The NAA is about 4 years old and already it is capable of conducting
performance auditing and ICT auditing courses for international participants besides capacity
building courses for our own auditors. Every year we conduct two such courses under the
Malaysian Technical Cooperation Programmes.
Apart from that, the NAD also seconds experienced senior audit staff to head the Internal Audit
Units for specified terms and recently the government has created 200 new posts for the Internal
Audit Units to enable them to conduct the audits more efficiently and effectively. I am
convinced that with the present coordination and assistance from us, it is anticipated that greater
reliance on internal audit work is imminent and this will definitely provide an additional
oversight and governance.
Distinguished Guests,
As a member of International Organization for Supreme Audit Institutions (INTOSAI), I am
happy to note that INTOSAI and the United Nations have created positive relationship between
them whereby membership to INTOSAI is granted to countries who are members of the UN or
one of its specialized agencies. INTOSAI/UN seminars have been regularly organised and the
UN has also contributed through its expertise in the INTOSAI triennial congress. All these joint
initiatives are indicative of the UN’s quest for finding options, methods and ideas that can
promote audit as a tool for good governance and socio-economic development.
As I mentioned earlier, we audits projects funded by United Nations organisations. In the case of
UNDP, for the year 2008 we audited seven UNDP projects and one project from United Nation
Population Fund as compared to 21 projects in 2007. We conduct transactions – based and
compliance audits. Among the findings include delays in the submission of completion reports,
delays in convening meetings, inadequacies of financial operation controls and so forth. The
risks of delays will definitely affect the implementation of the project as well as the time frame
and budget.
Ladies & Gentlemen,
I envisage that there are certain areas where enhanced cooperation between the NAD and
Representatives of Internal Audit Services would be mutually beneficial such as developing new
audit methodologies and approaches as well as assisting in the conduct of performance auditing
through training courses and secondment programmes. We welcome proposals for interregional
technical cooperation and capacity building and we are looking for opportunities towards
expanded partnerships.
To conclude, let me reinterate that Internal audit services performs an invaluable and critical
function that is providing the element of assurance to stakeholders, in your case, for programme
countries and for donors as well. Therefore, an effective service depends on the capacity and
ability to adapt to the current developments including in the field of information technology and
multimedia field which provided a new approach to manage our tasks.
I am once again delighted to welcome all of you to Kuala Lumpur and I do hope you have the
chance to stay back after your meeting to enjoy our beautiful city. I wish you all a productive
discussion over the next two days, and I have no doubt that given the esteemed group gathered
here today, that your agenda will be successfully achieved.
Thank you for your attention.