IIA Weighs in on Proposed Frameworks by FSB and IFAC/CIPFA
An important component of The IIA’s global advocacy initiative is to respond to exposure drafts promulgated by regulatory and standard-setting bodies around the world. Since internal auditing plays a critical role in helping organizations address governance, risk management and control matters, The IIA recently responded to the Financial Stability Board’s (FSB’s) Principles for An Effective Risk Appetite Framework Consultation Draft. The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. It brings together national authorities responsible for financial stability in significant international financial centers, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.
The IIA concurred that a Risk Appetite Framework forms the foundation of good risk management, and agreed that a well crafted, fully-vetted risk appetite statement should become the foundation of a risk management framework, organizational governance and even its culture. The IIA applauded the FSB’s efforts to propose a principles-based framework, and provided several key observations and recommendations, including:
- Promulgating the guidance beyond systemically important financial institutions (SIFIs),
- Providing clarity around various definitions and nomenclature,
- Providing guidance on how to navigate the full range of risks when deliberating its risk appetite framework and statement, and how a framework is incorporated into an organization’s broader ERM framework, and
- Developing an implementation guide with concrete examples.
The IIA also weighed in with comments on the International Federation of Accountants’ (IFAC’s) Good Governance in the Public Sector – Consultation Draft for an International Framework (developed in collaboration with the U.K.’s Chartered Institute of Public Finance and Accountancy (CIPFA). The IIA supported their efforts to establish a benchmark for good governance in the public sector at both the government and individual public sector entity levels. Comments to IFAC provided recommendations on elevating the role of internal auditing and the audit committee in the proposed framework to encourage better service delivery and accountability in the public sector.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. The IIA recently renewed a Memorandum of Understanding with IFAC to work collaboratively where mutual interests intersect. The IIA values this relationship and looks forward to working together in fostering sound financial management and effective governance and risk management in governments throughout the world.