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Effective communications needed between Internal Auditors and regulators in the Insurance sector.

Posted by | August 16, 2018 | Latest Audit Information & News, Uncategorized

Effective communications needed between Internal Auditors and regulators in the Insurance sector.

Regulators should require regular, structured and ongoing dialogue between the competent authorities supervising insurers and the internal auditors working in them, the ECIIA has said in response to recent consultation by EIOPA (European Insurance and Occupational Pensions Authority).

That is because internal audit is well-placed to provide an independent opinion about the internal controls, risk management and governance of the companies concerned.

Almost 8 out of 10 auditors in Europe say they follow the three Lines of Defense Model at some level, which enables them to provide objective assurance to their organisations.

“While internal audit’s main line of accountability is to the Audit Committee, it also shares information with the statutory auditors and the regulators,” ECIIA President Henrik Stein said. “Clear and effective communication between all these parties is vital in order to avoid duplication, or gaps, in the overall assurance picture,” he added.

The three line of Defense Model for Senior Management to ensure controls are in place are given hereunder:

  1. Management Controls & Internal Control Measures
  2. Finance Controller, Security, Risk Management, Quality, Inspection & Compliance
  3. Internal Audit

Therefore Internal audit is responsible for ensuring that the first and second lines are functioning as designed.  Internal auditors review all the processes and analyse all the risks of the company, and advise on the robustness of the control framework.

While internal audit’s main line of accountability is to the Audit Committee and then the board, it also shares information with the statutory auditors and the regulators. For its part, the Audit Committee is responsible for defining the mission and programme, both of internal audit and of statutory audit, and also for ensuring co-ordination between the two.  Clear and effective communication between the parties is necessary in order to avoid duplication or gaps and achieve synergies in the overall assurance picture.

For all these reasons, we recommend that the supervisor should establish a clear requirement for regular, structured and ongoing dialogue between the competent authorities supervising insurance undertakings and the internal auditors in those undertakings, in order to get an independent opinion about the internal controls, risk management and governance of the companies concerned.

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