Safeguarding Auditor Quality: Oversight and Training

A critical measurement of a Refiner’s compliance with the Responsible Sourcing Programme is its annual Assurance Reports.

Undertaken by a select number of firms approved by LBMA, these assurances examine and stress test a Refiner’s management systems and controls to ensure they conform with the requirements set out in the Responsible Gold Guidance.

For LBMA, the quality of our assurance scheme is only as good as those implementing it. For this reason, LBMA places a significant emphasis on safeguarding the independence, integrity and professional training of recognised Assurance Providers.

As previously described, LBMA has always used a multi-factor verification approach that considers a broad range of factors before achieving comfort with the assurance deliverables. This verification process – first by the Responsible Sourcing team, then by the Compliance Panel – provides a crucial layer of scrutiny to any possible failings in the assurance system, and ensures that no assurance engagements are approved until full comfort with the rigour and findings of the ASPs has been found.

LBMA has significantly advanced the oversight and quality control processes governing Assurance Providers and the vital role they play in validating Refiners’ adherence to the RGG. The steps LBMA has taken include:

Enhanced training requirements: Assurance Providers are required to undergo LBMA’s annual mandatory training, totalling six hours, followed by an exam for which they must receive a mark of 70% or higher. In 2022, nine individuals who did not pass the test were removed from the Approved Service Provider List.

Digging deeper with shadow audits: As part of the 2023 assurance process, LBMA staff shadowed six audits of GDL Refiners to observe how Assurance Providers carry out their work and to better understand how Refiners apply internal controls and due diligence practices into their operations. First-hand observations like this not only expose staff to the diversity of supply chains and the inner workings of Refiners but also provide LBMA with an additional layer of oversight that Assurance Providers satisfactorily challenge and examine Refiners in their implementation of RGG requirements. Going forward, LBMA commits to undertaking shadow audits as part of its focus on quality control. This represents a significant and unprecedented commitment of time and resources to the continual
improvement of standards and their universal implementation by Assurance Providers.

Applying oversight measures to under-performing firms and Assurance Providers: Only Assurance Providers who appear on LBMA’s Approved Service Provider (ASP) List are authorised to undertake third-party assurance engagement reviews under the RGG. This ASP List is maintained and updated regularly to ensure the expertise and independence of the ASP remains sufficient. Firms and individuals that do not meet LBMA expectations can be subject to a range of measures, ranging from the imposition of remedial work plans, removal from the ASP List or curtailing the geographical remit where a firm may perform LBMA assurances. In 2022, two firms were impacted by the latter two measures.

Revised application criteria for prospective ASPs: To join the ASP List, firms must complete LBMA’s application form, which requires applicants to demonstrate, among other things, their independence and appropriate capacity to undertake assurances for clients as large as a GDL Refiner. The firms’ individual Assurance Providers must also provide evidence of their personal competencies and subject matter expertise. In 2022, a new requirement was introduced requiring all new Assurance Providers to be ISAE 3000 certified. The change seeks to harmonise auditor qualifications and familiarity with the standard that underpins the RGG.

Collaboration with the other industry assurance programmes: In the first half of 2023, LBMA participated in two meetings of industry partners, convened by the OECD, to consider ways to improve the knowledge and performance of Assurance Providers. Based on these discussions, LBMA, the Responsible Minerals Initiative (RMI) and CopperMark agreed to hold a joint training session in 2024 that will focus on growing the soft skills of Assurance Providers. Similar trainings with other industry schemes for which Assurance Providers could receive professional development credits through standards bodies such as APSCA are possible once agreement is found on the service provider, funding and curriculum.

Introduced supporting guidance documents: In addition to publishing a much-expanded Third-Party Assurance Guidance in January 2023 that supports Assurance Providers to meet the new disclosure requirements introduced in RGG v9, LBMA will issue an Assurance Providers Toolkit before the end of 2023 that provides a list of the minimum key questions Assurance Providers should consider during an assurance and provides additional guidance on when and how to seek additional clarity and comfort from Refiners.