Telkom audit services

The past few years have marked an unprecedented shift in both Telkom's strategy and its operations in response to domestic economic trends, global economic prospects, the disruptive nature of new industry innovations, a fundamentally different and highly competitive landscape, as well as a highly regulated and changing regulatory landscape.

In the wake of Telkom's turnaround 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 governance, risk management and control mechanisms.

TAS 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.

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

Effective positioning

The Telkom organisational structure promotes the independence of TAS as a whole and allows it to form its judgements objectively. In order to ensure this independence; permit sufficient objectivity and ensure the accomplishment of audit responsibilities, the group executive: TAS reports functionally to the chairman of the Telkom audit committee and administratively to the chief financial officer. The group executive: TAS has unlimited access to all employees of the group, the chairman of the Telkom board, the chairman and members of the audit committee, as well as the group chief executive officer.

Professional recognition and continued improvement

TAS has been subjected to two independent external quality assessment reviews and was assessed as "generally conforms to the globally recognised Institute of Internal Auditing (IIA) standards in external assurance reviews conducted in 2005 and 2010, which is the highest level of conformance as defined by the IIA standards. Our next external quality assessment is planned for 2015.

Enhancing value delivery in a transformative business and risk landscape

TAS continuously seeks to ensure that it is a forward looking function, focusing on strategic, business and operational risks with the largest stakeholder impact. This has involved aligning the audit strategy with group strategy and identifying and responding to risk, promoting stakeholder value to growing stakeholder expectations and an expanding risk universe and that is a matter of deliberate design and collaboration. This is a journey and not an end state. TAS aspires to continuously advance along the eight foundational attributes of internal audit functions:

Focusing on the right risks at the right time

In developing the annual audit plan TAS continues to apply a risk-based audit methodology which requires internal audit to consider the most significant risks facing the group as well as industry and emerging risks, from which a comprehensive risk-based audit plan is derived. The audit plan is validated by executive management and the robustness thereof tested by other lines of group defence represented at the Telkom Combined Assurance Forum (TCAF). The plan is furthermore benchmarked by our co-sourced service providers against organisations in similar industry verticals and audit functions of a similar nature and size.

TAS also liaises with the external auditors and other assurance providers to enhance efficiencies in terms of combined assurance. The annual plan is reviewed regularly to ensure it remains relevant and responsive, given changes in the operating environment. The audit committee approves the plan and any changes thereto.

Resources and skills

The internal audit activities are performed by teams of appropriate, qualified and experienced employees, supplemented by co-sourced servicer 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 TAS team conducts audit work, or any other task, in accordance with the internal auditing standards set by the 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.

Internal controls

Through the use of the group-wide system of management action tracking TAS continues to monitor the timely remediation of reported control deficiencies. This system has empowered management to proactively manage the establishment of controls in their environments as well as to support the establishment and maintenance of a sound control environment. TAS will continue to provide reports to the audit committee and the executive committee (Exco) on the status of agreed remedial actions implemented by management.

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 Exco.

Integrated assurance approach

The role of TAS and its prominence in improving the control environment has increased over the last two years 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 group executive: TAS continues to chair the TCAF, which has proven to provide an excellent 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 yielded the following benefits to Telkom during the year that included:

• Avoidance of duplication of assurance effort
• A better understanding of Telkom's business operations through sharing of knowledge of the business and emerging and current business issues
• Timing assurance efforts to minimise business interruption and avoidance of assurance fatigue on the business
• Developing a portfolio view of assurance efforts for management and the audit committee

TAS has implemented a number of initiatives to enable a transition from an assurance provider to a control champion. This included a strategic change in our stakeholder engagement process, implementing control awareness initiatives that included targeted information sessions, monthly newsletters as well as the establishment of a control advice centre.