Business Services Industry

Around the globe Cyprus - auditing - Brief Article - Statistical Data Included

Internal Auditor, August, 2002 by Ioannis Koumeras

INTERNAL AUDITING IN Cyprus was initiated by the British administration soon after World War II, when the country was still a colony of Great Britain. At that time, most of Cyprus' companies were small- or medium-sized family businesses. Therefore, it is not surprising that internal auditing began in government organizations and major public utilities. Gradually, the profession expanded to the banking and insurance sectors and to a handful of major private companies.

TRUE VALUE

At the initial stages, internal audit shops were small and performed mostly accounting and financial work, providing assurance only to the financial controller. With the passing of time and the expansion of organizations, auditors gradually began to undertake additional responsibilities such as operational and management audits and assessment activities, and modern internal audit departments were formed. During the 1990s, as businesses continued to grow, more and more companies began to realize the advantages of forming an internal audit department. Particularly, as companies expanded through mergers and acquisitions, ownership and management inevitably were separated, and the need for greater internal control became apparent.

NATIONAL EXPANSION

When HA-Cyprus was formed in 1998, membership consisted of 41 individuals, and there were approximately 300 internal auditors working throughout the nation. Today, the profession comprises approximately 400 practitioners, and the institute boasts more than 125 members, with a steady upward trend. Most Cyprus organizations are still relatively small businesses, managed by the owner. As a result, the concepts of risk management and internal auditing haven't developed fully.

However, as organizations grow and their operations become increasingly decentralized from the main control of the founders and their families, management inevitably will require more reliable and independent information. This type of expansion will gradually increase the need for internal auditing.

MANDATES VERSUS VOLUNTARY ACTION

Currently, the only industry subject to laws requiring the establishment of internal auditing is banking. The Central Bank of Cyprus, regulator for all Cyprus-based banks, has mandated that all banks establish an internal audit department.

The Cyprus branch of the Institute of Directors, a society that works for the development of top management, is also developing a voluntary code of practice for corporate governance and internal auditing. The group has initiated a research project to analyze and promote these concepts.

PROFESSIONAL PRIORITIES

Toda/s Cypriot auditors are focused on finding the best approach for implementing good corporate governance practices and determining the ideal role of the audit committee. Additionally, modern practitioners are geared toward adding value to the board by establishing appropriate internal controls and risk management.

To further advance the profession, IIA-Cyprus has taken steps to introduce certified internal auditor (CIA) training in Cyprus. The institute is also aiming to accredit the CIA qualification as the main qualification for the nation s internal audit professionals.

IIA-Cyprus' activities have led to increased awareness of the need for internal auditing. These efforts, combined with the anticipated growth of Cyprus organizations, will help ensure continued expansion of the profession and demand for the services auditors can provide.