IFRS 17: The impact on internal audit
30 May 2019
This is not the first time I’ve spoken about the importance of a full and accurate impact assessment, and it certainly won’t be the last, but today I want to focus specifically on how IFRS 17 is likely to impact internal audit. With the help of internal audit expert Klaas de Vries, in this blog I have summarised the key impacts, and the corresponding ways in which you can best utilise your internal audit function ahead of 1 January 2022.
First and foremost, there is the compliance with the standard - internal audit will have a huge part to play in ensuring appropriate internal controls are designed and implemented; and that stakeholders across the company are aware of what is required of them to confirm their compliance. To enable greater stakeholder confidence and minimise the risk of re-work at a later stage, internal audit can plan and deliver early and continuous assurance that the necessary steps have been taken with all relevant stakeholders.
Secondly, given that IFRS 17 will impact your financial reporting to key stakeholders, it is important to consider the effectiveness of implementing different methodology choices and manage the overall internal control environment appropriately. Again, internal audit can get ahead of the game in providing assurance over the effectiveness of implementing methodologies, appropriateness of internal controls designed over financial reporting processes.
Given the additional data requirements and complex modelling environment of IFRS 17, two more quick wins for your internal audit function are assessing (1) adequacy and effectiveness of controls over data accuracy and completeness; and (2) the appropriate governance over models. In addition internal audit can be a key function to review the design of your target operating model to ensure it is aligned with strategy and is embedded within your organisation.
Another consideration is the effective set up and delivery of your programme - how do you know if financial and human resources are being managed effectively for a timely delivery with the right scope and results? Internal audit can perform a health check on the programme as a whole to give a view of the strengths and weaknesses, or can focus in on areas that have already been identified as requiring attention, such as governance or risk and issue management.
Finally, training your people will be absolutely vital in order to make informed decisions, define requirements and successfully transition from programme to business as usual, and internal audit could be used to review the appropriateness, consistency and quality of training across your company.
The key takeaway here is that internal audit are a team of many talents, and should therefore be used to their fullest extent. Look out for a blog from Nick Wilkes in the coming weeks to learn more about how to ensure foundations for a successful project.