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Individual Insurance Association

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Introduction

During the last decade, the Individual Insurance Association (IIA) has grown significantly that it is not only involve in the insurance business but also investments, savings, and checking accounts. In order to better serve the policyholders, the IIA decentralized its administrative operations. Additionally, the need to reduce administrative expenses has led the firm to digitize its processes, and presently nearly all processes are linked to a computer application. However, as the IIA keeps expanding several critical issues has risen as a result of the lack in corporate governance. Beginning with the formation of the Audit Committee when the IIA was founded, the IIA has shown lack of corporate governance. The evidence could be seen with the Audit Committee themselves performing the audit. This involvement has impaired the independence and objectivity as stated in the Code of Ethics Rule 2.1 and International Standard for the Professional Practice for Internal Auditing Standard Rule 1100. The Audit committee should not review and approve their own audits. ...read more.

Middle

The controller's role has definitely violated this standard as he was in charged with both the accounting and auditing process. Additionally, regarding the issues with the controller, as a person who plan and supervise the internal audit department, according to Code of Ethics Rule 4.1 should have necessary knowledge, skills, and experience; however, the controller, in this case, is lack of such requirement. With his inadequate background, he might have misdirected the Internal Auditors in performing the audit. One of the misconduct that might have been caused by either biased or lack of auditing knowledge of the controller was to direct the Internal Auditors to only review the input/output of the computer systems' control. Under International Standard Rule 1210. C1, The head of the Internal Auditor should have allowed the Internal Auditors to work together or consult with the expert to review the control of the computer's internal operations since they might have lack of knowledge in the computer operations. ...read more.

Conclusion

However, sometimes conflicts may have occurred between them as a result of different objectives: Internal Auditors are more operational focused and External Auditors are more financial statement focused. This problem can be solved with effective communication between the two; therefore, the Internal Auditors of the IIA should have good communication skills in addition to the auditing experience/background. Moreover, the out of hand decentralization has also been taken care by the implementation of matrix organization. This system enables the transparency of information between branches as well as within the organization. As a result, the internal auditors are able to perform more reliable audits and report for the Audit Committee. In conclusion, although in the beginning, there was inadequate corporate governance in place. After reviewing the actions that have been taken by the management, the IIA corporate governance seems to be back track. However, regular enforcement and training on the employee by the management and regular monitoring and audit by the internal audit department are required to maintain the good corporate governance. ...read more.

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