ECIIA: Three lines of defence model crucial to success of non-financial reporting

22 April 2016

The ECIIA has comment to the EC that internal audit can contribute most effectively to the successful implementation of the EC’s directive on non-financial reporting in organisations that have adopted the three lines of defence model of corporate governance.

Independent internal audit departments can help organisations transform their compliance with the directive from a box-ticking exercise to something that improves the accuracy and transparency of information across the entire enterprise.

“Internal audit has a broad view across all the systems and processes in organisations, and an in-depth understanding of risks and controls,” wrote ECIIA President Henrik Stein in the body’s response to the consultation. “This puts it in an ideal position to provide advice, assurance and insight around the reporting of non-financial information.”

As well as continuing to provide assurance to boards and senior management teams on how controls mitigate risks to the organisation, internal audit can also contribute significantly to non-financial reporting, for example, by reviewing:

• The underlying processes for the production of the report, including governance
• Risks identified in executive and board risk assessments around operational issues, stakeholder relationships, compliance and reputation
• Issues of materiality
• The balance between conciseness and transparency in the report
• The accuracy of the description of the business model in the report.

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