PHOTO
DUBAI, UAE: After a 2017 order by the Abu Dhabi Accountability Authority (ADAA), Abu Dhabi Government organizations began strengthening their internal controls over financial reporting (ICFR) frameworks. Compliance has helped improve efficiencies, enhance financial reporting and even boost future investment prospects by improving governance in these past three years, according to a new KPMG report. ‘Beyond regulatory compliance: Insights on Resolution No. (1), 2017 of the Chairman of ADAA’ states that ICFR programs are evolving into opportunities to deliver value to the bottom line. Over the last three years, organizations have derived great value beyond compliance that covers areas ranging from standardization of processes and mitigating revenue leakages, to hitherto unexplored changes in the operating model.
Siddharth Behal, Partner & Head of Internal Audit Risk & Compliance Services (Middle East), KPMG Lower Gulf Limited said: “Today’s organizations need to significantly transform their business operating models to remain competitive amid a growing number of industry challenges. ICFR programs are, as of yet, an unfulfilled opportunity to deliver value to the bottom line of a company. Internal control teams need to take a close look at the fundamental business processes, understand core issues and financial reporting risks and subsequently identify opportunities for value creation.”
The majority of organizations surveyed have documented process-level, entity-level and IT general controls. A few have also commenced covering anti-fraud controls and compliance as part of their ICFR exercises. Key risks and controls were documented using various tools, such as process maps, process flowcharts and risk and control matrices.
According to the KPMG report, in response to ADAA Regulation No. (1) of 2017, more than half (58%) of organizations initiated their ICFR implementation journey in 2018, while others started in 2019. All the entities surveyed by KPMG used the COSO internal control framework for their ICFR implementation. Approximately 23% noted control failures for in-scope processes.
Within entity-level controls, absence of a comprehensive legal compliance framework and robust fraud risk management were identified as the most common deficiencies by respondents.
A majority of respondents in the KPMG survey felt that compliance efforts will reduce over the next five years. This is expected to happen as entities strengthen the ICFR mechanism and turn it into it an excellence-driven activity, rather than merely a compliance-driven one.
The KPMG report highlights that with many listings on the horizon, investors are also willing to assign significantly higher PE multiples to entities with better governance and internal controls. Implementing an ICFR program is an important step in this direction, as multiple entities seek to become transaction ready with the Abu Dhabi Government looking at several listings in the next two to three years.
For more information, please visit https://home.kpmg/ae/en/home/insights/2021/03/beyond-regulatory-compliance.html
© Press Release 2021
Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
