On November 25, the Mongolian National Association of Internal Auditors held their official grand opening. The association is a part of the Institute of Internal Auditors Global, an international auditing organization based in the U.S., and will be known as the Institute of Internal Auditors Mongolia (IIAM). Former Chairman of IIA Global Phil Tarling attended the opening ceremony held at Fine Arts Zanabazar Museum.
Zasgiin Gazrin Medee spoke with the Chairman of the Board of IIAM and General Auditor at Trade and Development Bank of Mongolia, P.Gantuul.
We would like to congratulate you on opening a branch of the prestigious Institute of Internal Auditors (IIA Global) in Mongolia and helping create opportunities and open doors for our domestic auditors. Can you give us detailed information about the institute?
Thank you. We first received approval to open a branch in Mongolia from IIA Global in February 2016. IIA Global is an international organization based in the U.S. that helps develop and promote internal auditing worldwide, while also setting standards for internal audits and accrediting auditors with internationally recognized certificates. We are the only official representatives of IIA Global in Mongolia.
The IIA has 185,000 members in 170 countries, with 100 institutes and 160 branches. Out of all the members, 17 percent reside in the Asia-Pacific region. By becoming a part of this 75-year-old institute, the foundation has been laid to help bring auditing in Mongolia to international standards.
Even though it is officially an institute, you might notice we used the term association. IIA Global gives institutional accreditation in stages. Therefore, becoming an official institute is a matter of time. Mongolian internal auditors worked tirelessly for the last three years to get IIA Global approval to open a branch here. Auditors from both the public and private sector, a working group from JICA, and a Ministry of Finance project to strengthen internal auditing in Mongolia all greatly contributed. The former Chairman of IIA Global, Phil Tarling, will represent IIA Global at our opening ceremony. Phil Tarling has 30 years of experience working in the auditing industry. He was the President of the U.K. and Ireland Institute and the President of the European Confederation.
External audits, meaning those done by foreign firms, have developed quite a lot in Mongolia. Internal audits are relatively new in the country. What benefits will come from the development of internal audits?
External audits verify if financial statements are true. Internal audits cover a wider range. Internal audits review marketing, human resources, and the operations of a company, and give consultative advice. Even though internal audits work within an organizational structure, they are independent from the administration and work under the company being audited. Internal auditing is divided into verification and consultancy. External audits and internal audits must cooperate in order to ensure there is no redundancy in services.
Internationally, internal audits are seen as a good experience. The value and the reputation of a company are directly linked to this. As a company expands, it is recommended that they have an internal auditing mechanism as administration becomes more tedious and complex. Internal audits can reveal what is not working in a company. It gives the administration the opportunity to fix a problem quickly. For business owners, internal audits can provide an unbiased report about whether or not their administrators are correctly implementing the strategy and goals of the company.
There have been new risks arising recently. For example, compliance risk and cyber security. Internal audits protect clients from these types of risks and threats. The reputation and the trustworthiness of a company can be secured if they conduct internal auditing. This helps companies retain their partners and customers.
Is Mongolian internal auditing up to international standards?
As of now, internal auditing is relatively new. Internal audits in the private sector started about 10 years ago, whereas auditing in the public sector stated four to five years ago. Even though it is early to compare it to international standards, we believe there is an opportunity for us to develop it in a short amount of time.
Internal auditing is an important component of business in any sector. The most important thing right now is to prepare a professional and capable workforce.
What benefits does membership in this association offer?
By becoming a member of our association, you automatically become a member of IIA Global. This allows access to an auditing database that has been compiled for the last 75 years. There are many opportunities only offered to members. For example, it opens up opportunities to partake in professional seminars and to buy materials and books at prices only offered to members. Members also have a chance to network with other professionals. To be specific, members are offered 32 hours or 4 days of seminars and 8 hours of networking events free of charge.
If accredited with a certified internal auditors certificate, it opens up the opportunity for an auditor to work internationally.
Is our country’s legislative and legal environment ready for international auditing standards to be implemented?
Establishing a favorable legal environment is in progress right now. In 2011, an amendment was made to the Budget Law that made internal audits a legal requirement. Also, the government approved internal auditing rules and amended them in 2015. Auditing positions are becoming available in various government agencies, such as ministries. The Ministry of Finance has drafted a bill on internal auditing in the public sector. When the bill is passed, it will create a legal environment for internal auditing in the public sector. The internal auditing of companies is regulated by the Company Law.
How will you prepare auditors? How many members have signed up so far?
The IIA has 140,000 internal auditors with official accreditation, 62,000 of them being in the Asia-Pacific region. Our branch is working to offer courses that will be able to officially accredit auditors. We are hopeful that it will create a very capable workforce. Outside of accrediting internal auditors, there is an opportunity to cooperate with universities. The Internal Audit Education Partnership (IАEP) is being implemented at 48 universities in 12 countries. This program creates certified auditors through universities. This would mean that the training would be up to international standards. Auditing courses are very expensive around the world, but they offer a great opportunity to help prepare a capable workforce.
Our association currently has 50 members from 20 different organizations. This includes both the private and public sector. Anyone interested in internal auditing can become a member. Maybe 50 sounds low, but we see this as a good start. We forecast that we will have 50 members in two years time. IIA Global first started with 24 members and had 1,000 members by the end of that year. We believe that our association will expand rapidly as more people understand the importance of internal auditing.