According with the Merriam Webster dictionary, the word “Conflict of Interest” with abbreviation called “COI” refer to a conflict between the private interests and the official responsibilities of a person in a position of trust.
The definition of “Conflict of Interest” also defined its meaning through Wikipedia and stated that conflict of interest refers to the situation of the people or entities which is involved with multiple interests, financial, or otherwise, which to serve the another one’s interest for the individual or entities that could involve in working against the another.
The definition of “Conflict of Interest” is provided its meaning through the Britannica Dictionary that a problem caused by having official responsibilities that involve things that might be helpful or harmful to you.
Conflicts of Interest and Internal Auditor concerns
The internal auditors need to bear in mind about the Internal audit activities performed and ensure that the conflicts of interest have been dealt with in terms of working.
According to the meaning above, Conflicts of interest are a major concern of the internal auditor since the result of the conflict of interest are inherent and massive abuse which are against with the best practice, and it could create fraud for the company.
On another hand, one of the main audit activities and objective is the prevent the company from the material misstatement and the internal auditors are to ensure that the company organization’s structure, designed policies and procedures and control monitoring mechanisms to prevent the opportunity of conflict of interest occurred.
Normally, companies and especially financial institutions issue policies, procedures and methodology to ensure that conflict of interest activities are not the risk in their organizations. Typically, those policies, procedures and the measure forbid conflicts of interest in two obvious statements as below:
- There are clearly stated conflicts about their interest in their HR or related policies, procedures and their reporting escalation.
2. When there are no clear conflicts of interest, the employee or person who are involved in this activities required to disclose the conditions from related activities and reporting to their management.
Companies and financial institutions are highly recommended to develop conflicts of interest policies, procedures, and methodology and it is necessary to provide the annual training about conflicts of interest to all employees and related stakeholders.
Companies or financial institutions should prepare statements for newly hired employees by instructing them to disclose in writing for any conflicts of interest.
Conflicts of interest should be completed and to be signed on an annual basis, if the employees are highly likely to be involved with conflicts of interest in activities.
Focus point on auditing conflicts of interest
To perform the audit review of conflicts of interest could be hard because this matter normally involves third parties which are outside the companies or financial institutions. The internal auditor can perform the detailed testing on the conflicts of interest as some audit objectives as below:
- The internal auditor should ensure and verify that the conflicts of interest policy are in place and ensure that the policy, procedures, or statement are available to all employees to access for reading.
- The internal auditor should confirm that the conflicts of interest statement was signed by all employees.
- The internal auditor should ensure that sufficient training on the conflicts of interest is conducted within the companies or financial institutions provided to all employees.
- The internal auditor should ensure that all conflicts of interest that occurred are appropriately documented by only the assigned departments such are HR, Internal Audit and Compliance Department.
- The internal auditor should ensure that the process of vendor selections regarding the procurement business process are properly designed with effective controls.
- The internal auditor should review the public relationship between the key vendors or contractors with key people who are involved with the procurement processes.