Protection notice / Copyright noticeConfidential / © Siemens AG 2009. All rights reserved. Oversight and Compliance Public and Private Sector models Mark.

Protection notice / Copyright noticeConfidential / © Siemens AG 2009. All rights reserved.

Oversight and CompliancePublic and Private Sector models

Mark GoughDeputy HeadCompliance InvestigationsCorporate Legal and Compliance,Siemens AG

IAS Conference, Brussels, 13 October 2009

Siemens ComplianceProtection notice / Copyright notice

2009-10-13 Mark GoughPage 2

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Overview

1. History

2. Audit and Investigation – Differences; Standards

3. Feeding Investigations

4. UN Model

5. Siemens Model

6. Lessons learned

7. Going Forward



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History

The Gough Experience – History Repeats

United Nations 1996 – 2008 (Investigations Division)

- building the unit; conducting/managing investigations; anti-corruption strategies

Siemens AG 2008 to date (Compliance Investigations)

- Building the unit; conducting/managing investigations; anti-corruption strategies



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Audit and Investigation

Differences:

Audit = control of systems and regulations; lacunas in controls; inferential; consultative

IAA Standards: Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Investigation = control of organizational behaviour and ethics; lacunas in ethical and/or moral behaviour; evidentiary; defensive/adversarial and consultative

Investigation is a legally-based, fact-gathering process to identify personal culpability for violations of internal rules, regulations and national laws and make recommendations for sanctions.



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Audit – Dealing with Fraud (IIA Standards)

1210 - Proficiency

1210.A2 - Internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization, but are not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud.

(IIA International Standards for the Professional Practice of Internal Auditing)



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Feeding Fraud and Corruption Investigations

Audit Support for Successful Investigations

- Heavy reliance on input from experienced colleagues (friendly)

- Audit reports and auditors - rich veins of information

- Information collection tasking of audit groups – yes or no?

- Formal or informal audit reporting to investigations

- Audit cycles and joint activity



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The United Nations Model

Internal Audit Division The internal auditing function is an independent, objective, assurance and advisory

activity designed to add value and improve the Organization's operations. Internal audits help the Organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control and governance processes.

According to United Nations Financial Regulation 5.15, OIOS is responsible for conducting independent internal audits in accordance with the International Standards for the Professional Practice of Internal Auditing.

Internal audit reports contain recommendations intended to address shortcomings identified while reviewing specific management activities or operational areas. Implementation of the most critical audit recommendations by management is carefully tracked.

Programme managers are expected to promptly act on the audit findings and recommendations and to also report to OIOS on the status of implementation. OIOS follows up and monitors its audit recommendations until they are fully implemented.



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The United Nations Model



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The United Nations Model – Feeding Investigations

Internal Audit Division Manual:

B.3.1.1 Identification of Fraud Indicators

- IAD staff shall immediately report to the Director any possible cases of fraud orother major irregularity that comes to their attention, and which may requireinvestigation by the OIOS Investigations Division. In addition to providing theInvestigations Division with information and documentation on any such cases, the auditor may, if required, be asked to assist in the investigation itself.



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The United Nations Model – Issues for consideration

Common Management – Investigations and Audit - need for separation?

Debates in OIOS - money, people and influence

Support to Investigations: - Formalised- Is this correct?

Implementation of Recommendations – does it happen?



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The Siemens Model

The mission of Siemens Corporate Audit (CF A) is to add value and improve the worldwide operations and processes of Siemens AG and its Affiliated Companies (Siemens), by independently and objectively evaluating and reporting on Siemens' financial reporting integrity, the effectiveness of risk management and internal control systems, and the adherence to Siemens' compliance policies in a systematic and disciplined manner.

CF A shall conduct – in accordance with an enterprise-wide, risk-based schedule established in agreement with the Managing Board and Audit Committee – the following audits, including, but not limited to: (i) financial audits, (ii) operational audits, (iii) information technology audits, and (iv) compliance audits in coordination with the Chief Compliance Officer. The results of these audits will be reported to the Managing Board and the Audit Committee, as deemed appropriate.

The audits conducted by CF A will meet or exceed the International Standards for the Professional Practice of Internal Auditing issued by The Institute of Internal Auditors.



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The Siemens Model

Audit

Historical Problems in Detection → Complete Revision of Structure (Financial Audit, Operational Audit, Compliance Audit, Forensic Audit, IT Audit – plus Operational Review)

Resourcing and Management - Separated– 500 audit staff worldwide in 4 hubs (USA, China, India, Germany)- 600 Compliance staff worldwide (17 investigators plus pool)

Remediation responsibility – only in Compliance function

Support to Investigations – Not so formalised – but connected

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Global Compliance Organization – Corporate Functions

Corporate UnitsCompliance

Officer

SectorCompliance

Officers

CompliancePolicies,

Communication & Training

Compliance Program, Projects

& Reporting

ComplianceOperating

Officer

DisciplinarySanctions

Compliance Helpdesk &Monitoring

ComplianceInvestigation

RegionalCompliance

Officers(RCOs)

Compliance Legal

Division Compliance

Officers(DCOs)

Chief Compliance

Officer

Cross SectorCompliance

Officers(DCOs)

ComplianceGlobal

Coordinators

Compliance represented in Managing Board Embedded in business units and regions

Member of the Managing BoardGeneral Counsel



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Lessons Learned – Successful Audit and Investigation

Independence of Audit and Investigation:

- Must be real - not perceived- Must have funding to mirror responsibilities- Must be able to independently determine audit plan

Management of Audit and Investigation:

- Must be committed to strategic common interest- Must be audit or legally trained- Must be open to information sharing (need to know concept)- Must be investigation savvy



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Going Forward

Which model feeds investigations best?

Are they different?

Audit Specialisation – Forensic and IT Audit data collection (+++)

Notification System formalised

Reduction of Competition

Agreed Common Goals



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Thank you for your attention!

Confidential / © Siemens AG 2009. All rights reserved.

Mark GoughDeputy HeadCompliance InvestigationsSiemens AGCorporate Legal and ComplianceCL CO I

Wittelsbacherplatz 280333 Munich, Germany

Phone: +49 89 636 32844Fax: +49 89 636 1332844Mobile: +49 1522 8874914

E-mail: [email protected]

Protection notice / Copyright noticeConfidential / © Siemens AG 2009. All rights reserved. Oversight and Compliance Public and Private Sector models Mark.

Documents

siemens compliance protection

date compliance investigations

investigations audit

siemens model

mark goughpage

compliance public

investigations division

feeding investigations