ACA Compliance Group October 04, 2019 The Institute of Internal Auditors (IIA) published a new position paper on September 19, 2019 about the importance of an Internal Audit Charter and how it enhances the effectiveness of the Internal Audit function. What is an Audit Charter?Internal audit functions play a vital role in providing assurance of an organization’s risk management practices and protecting and enhancing organizational value. The internal audit charter is a formal document that clearly defines and articulates “marching orders” for the internal audit function from the governing body (typically the audit committee) and management. It should be reviewed and approved by the governing body on an annual basis. The charter must define, at minimum, the following items:
The charter provides a blueprint for how internal audit will operate and allows the governing body to emphasize the value it places on the independence of the internal audit function. The charter establishes this independence by defining reporting lines from the Chief Audit Executive (CAE) to the governing body and, administratively, to executive management. It also provides internal audit the authority to achieve its tasks by allowing unrestricted access to records, personnel etc. for the purpose of performing its duties. Vital Components of an Audit CharterIn its position paper, the IIA identified seven vital components that support the overall strength and effectiveness of the internal audit function and should be included in the internal audit charter:
Financial Institutions should confirm they have an Internal Audit Charter and that it includes the seven vital components listed above. Note: The Institute of Internal Auditors (IIA) has produced model charters available to IIA members in eight languages. You can find them here: https://global.theiia.org/standards-guidance/recommended-guidance/Pages/Model-Internal-Audit-Activity-Charter.aspx Why is there a need to formally establish the purpose nature and responsibility of the internal audit activity in the audit charter?The internal audit charter is a formal document that defines internal audit's purpose, authority, responsibility and position within the organisation. The charter should set out the nature of services that internal audit will provide and how internal audit will help the organisation to achieve its objectives.
Which document defines the purpose authority and responsibility of the internal audit activity?The internal audit charter is a formal document that defines the internal audit activity's purpose, authority, and responsibility.
What is the responsibility and authority of an internal auditor?Responsibility of the Internal Auditor:
The Company assets are secured, and Internal Control of the company is effective and efficient. Internal Audit is also responsible to ensure all kinds of risks are informed and communicated to the management of the company and its BOD.
What is the purpose of the internal audit activity?The Role of Internal Audits
“The role of internal audit is to provide independent assurance that an organization's risk management, governance, and internal control processes are operating effectively.” An internal audit is conducted objectively and designed to improve and mature an organization's business practices.
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