In this article, we take a look at what needs to be in place for an effective audit of a treasury function, taking in both the effectiveness of the first and second line of defense.
Over the years, I have asked various auditors that are involved in performing operating audits what is the most difficult business unit or function to audit. In fact, when I put this question to a group of three or more auditors, someone in the group will invariably make reference to treasury.
There are various reasons why treasury is potentially an auditor's nightmare but some of considerations that come to mind may include:
1. Is it even possible to gain oversight of this business unit without following a risk based approach to your audit?
2. Can you effectively audit treasury without assessing appetites in the front office?
3. How can tail risks be identified and then connected to a control network is a key requirement of a control gap assessment.
4. How to independently measure the performance of the front office will help the auditor understand whether the treasury team are missing out on opportunities.
5. Can you do any of this without having core knowledge and an appreciation of what it feels like to drive in the trader's seat. This knowledge set would need to accommodate the nuances of the products that are traded, how they are price, and where they are fragile.
In the PowerPoint presentation below [LINK], we explore these key themes of an effective treasury audit in more detail, please feel free to take a look.
Presentation for an Effective Treasury Audit | Causal Capital [LINK]
Over the coming months ahead Causal Capital will be introducing a suite of practice case studies, training programs and reading libraries to help auditors improve their coverage and quality of audit when they have to assess any part of the treasury function in their business.