Aligning governance, risk and controls

Over the past year Telkom has placed extensive effort on aligning and streamlining the Group’s strategies and operations to enhance its effectiveness, accountability, and transparency to better deliver value going forward.

As Telkom’s strategy and operations shifted in response to market realities, industry regulation and stakeholder expectations, it became even more important for Telkom to maintain a high level of governance, risk management and control systems to demonstrate responsible stewardship. Maintaining high standards included the continued empowerment of assurance providers to independently assess the efficiency and effectiveness of these risk management and control mechanisms.

Telkom Audit Services is governed by an internal audit charter which is approved by the Audit Committee and is reviewed annually. The charter defines the purpose, authority and responsibilities of the function.

Telkom Audit Services, in accordance with best in class practices, is an independent, objective assurance and advisory function designed to add value and improve Telkom’s operations. Telkom Audit Services aims to assist Telkom in accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes.

The Telkom organisational structure promotes the independence of Telkom Audit Services as a whole and allows it to form its judgments objectively. In order to ensure the independence; permit sufficient objectivity and ensure the accomplishment of audit responsibilities, the group executive (GE): Telkom Audit Services functionally reports to the chairman of the Telkom Audit Committee. The GE: Telkom Audit Services also interacts directly with the Board and reports administratively to the CFO. The GE: Telkom Audit Services has unlimited access to all employees of the company, including the chairman of the Telkom Board, the chairman and members of the Audit Committee as well as the GCEO.

Annually, Telkom Audit Services compiles a comprehensive risk-based audit plan which is derived from various sources of key risks. The assessment and audit plan is validated by executive management and approved by the Audit Committee. The audit plan is benchmarked by our co-sourced service providers against organisations in similar industry verticals and audit functions of a similar nature and size.

Telkom Audit Services also liaises with the external auditors and other assurance providers to enhance efficiencies in terms of combined assurance and test the veracity of the audit plan. The audit plan is reviewed regularly to ensure it remains relevant and responsive, given changes in the operating environment. The Audit Committee approves any changes to the plan.

A summary of audit results, performance against the approved audit plan, and progress on the resolution of management action items is presented quarterly to the Audit Committee and monthly to the Exco.

The Telkom Audit Services team conducts audit work, or any other task, in accordance with the internal auditing standards set by the globally recognised Institute of Internal Auditing (IIA). This requires compliance with the Standards for Professional Practice of Internal Auditing (SPPIA), in particular, the codes of conduct and ethics that are promulgated from time to time by relevant professional bodies, and any other corporate governance initiatives.

Through the use of the company-wide system of management action tracking, Telkom Audit Services continues to monitor the timely remediation of reported control deficiencies. This system has empowered management to pro-actively manage the establishment of controls in their environments as well as to support the establishment and maintenance of a sound control environment. Telkom Audit Services will continue to provide reports to the Audit Committee and Exco on the status of agreed remedial actions implemented by management.

Telkom Audit Services was assessed as “generally conforms” to the IIA standards by KPMG in an external assurance review in 2010, which is the highest level of conformance as defined by the Standards. Furthermore Telkom Audit Services adopted strategies and techniques aimed at addressing the specific internal audit requirements of King lll, which includes better strategic alignment of the assurance efforts of Telkom Audit Services.

During the year, Telkom Audit Services established a quality assurance function as well as developed a quality assurance and improvement programme (QAIP) to cover all aspects of the internal audit activity. The programme includes both internal and external evaluations which assess the effectiveness and efficiency of the internal audit activity.

The internal audit activities are performed by teams of appropriate, qualified and experienced employees, supplemented by co-sourced service provider resources. This augmentation has enabled sufficient attention being directed towards the growth aspirations of Telkom in areas of new business as well as key capital-intensive programmes, whilst ensuring that existing business areas receive due attention.

The role of Telkom Audit Services and its prominence in improving the control environment has increased through key contributions made towards embedding an effective combined assurance framework and model as well as the piloting of the Control Self-Assessment (CSA) process in selected functional areas.

The 2013 financial year marked a significant transition for Telkom Audit Services from an assurance provider to a control champion. During the year, Telkom Audit Services implemented a strategic change in our stakeholder engagement process and introduced a number of control awareness initiatives that included targeted information sessions, monthly newsletters as well as the establishment of a control advice centre. Telkom Audit Services enjoys a remit that spans the entire company and we have leveraged this unique position to promulgate good control practices that would further improve the operations of Telkom.

The GE: Telkom Audit Services continues to chair the Telkom Combined Assurance Forum (TCAF), which provides a communication platform for the assurance providers in Telkom as well as constituting a springboard for the provision of a written assessment on the effectiveness of the internal control environment. The TCAF under the stewardship of the GE: Telkom Audit Services yielded the following benefits to Telkom during the year that included: