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Minister of Finance and Economy: Confidence remains below pre-crisis levels
Confidence remains below pre-crisis levels, Minister of Finance and the Economy Larry Howai has said. While delivering an address at the Hilton Trinidad Hotel and Conference Centre in St Ann’s on July 10, Howai said: “In the aftermath of critical governance failures and diminished trust and confidence from the financial crisis, investors and other key company stakeholders will increasingly rely on audit committees as a critical control mechanism, a quasi ‘guardian of their interest.’ “Even though more than half of a decade has passed since the crisis, confidence remains far below pre-crisis levels. Rebuilding confidence is mandatory if the private sector in the region is to grow, be innovative and assist in transforming the region’s economy.”
He was speaking at the Caribbean Centre for Auditing Management’s one-day conference. He was listing the new roles audit committees must take on in the 21st century. “As such, in this post-crisis era, stakeholders will be more focused on integrity of financial reporting, debt management, and better quality communication arrangements so that the audit committee can serve as a go-between with the stakeholders and the board of directors to ensure that their best interests are served,” Howai said. The Finance Minister started the topic when he said the responsibilities of audit committees “continue to evolve.” Audit committees must continuously review and challenge the risk profile of the business and ensure effective mitigation control systems are instituted, he said.
“Next is the extended role of the audit committee,” he said. “No longer can the role of the audit committee be focused narrowly on financial reporting. In conducting risk management exercises, audit committees can have expanded responsibilities, especially with non-financial issues, such as managing reputational risks on social media, legal and regulatory compliance, technology, human resourcing, and people skills.” In the face of the challenging economic conditions globally, these areas can provide opportunities which may have previously gone unexploited, he said.
The Finance Minister also addressed “the role of the audit committee in assisting with the challenges that will confront executive management in an uncertain economic environment.”
With increased focus on delivery to ensure companies survive challenging times, audit committees can be instrumental in directing focus on auditing for performance evaluation and success detection, he said.
At the micro level, much continues to be expected from a company’s management with less financial resources. This creates a greater need to embrace efficiency and accountability to shareholders and other stakeholders, as part of a wider transparency and financial management framework, the minister said. Performance auditing and benchmarking can highlight inefficiency —areas which fail to achieve desired results and impact—and waste detection and corporate malfeasance in its nascent stage. “We can therefore ill-afford to overlook the meaningful contributions audit committees can play since they are a vital forum for open communication between management, internal and external auditors, shareholders and the board of directors, to address risks and ensure that companies conduct business in a proper manner,” he said.
Howai said “the value audit committees can bring to strengthening internal and external audit functions” must also be kept in mind. “Without robust auditing practices, the potential growth and success of the financial services industry are threatened,” he said. Thorough internal and external audit functions are “instrumental in combating economic and financial crimes which consist of a broad range of illegal activities, including fraud, tax evasion, money laundering, illegal capital flight and smuggling,” he said. “Economic and financial crimes create significant risks for the individual, and wider community, and can have negative cross border effects and reputational risks for prominent institutions and for our region’s image,” he said. “Additionally, rapid advancements in technology offer new avenues for these crimes to be facilitated, and new auditing arrangements require auditors to be proactive in the detection and reporting of economic and financial crimes.”
Given the importance of the financial services industry to the ongoing development of the region, he said, as well as the region’s track record in the provision of specialist financial services, there is a great need to be relevant with respect to auditing best practices and meeting international standards and regulations.