Internal Audit Charter

Internal Audit Charter

The basic elements of an internal audit charter

The Institute of Internal Auditors has identified seven main aspects that support the strength and effectiveness of the activity in general and that must be included in the internal audit charter (document). Although some audit charters may not include all of these elements, any aspect that the charter does not address threatens to weaken it and ultimately weaken the activity

Certified Professional Internal Auditor – CPIA (USA)

1️⃣ Mission and Goal

  • The mission of internal audit is to enhance and protect organizational value by providing risk-based, objective, and objective assurance, advice, and insight.
  • The objective of an internal audit is to provide independent and objective assurance and advisory services aimed at adding value and improving the operations of the facility.

2️⃣ International Standards for the Professional Practice of Internal Auditing

The internal audit activity manages itself by adhering to the mandatory elements contained in the International Professional Framework for the Practice of Internal Auditing (IPPF) issued by the Institute of Internal Auditors, including the basic standards for the professional practice of internal auditing, the definition of internal audit and the principles of professional ethics.

3️⃣ Authority – the charter should include

A text on the relationship of dual functional and administrative subordination to the chief audit executive in the facility.

A text stating that the Board of Directors will decide, ensure and ensure that the internal audit activity has sufficient authority to fulfill its duties through:

  • Adoption of the internal audit charter.
  • Adopting a risk-based and flexible internal audit plan in a timely manner.
  • Approving the internal audit budget and its resource plan.
  • Receiving timely communications from the Chief Audit Executive regarding implementation compared to the internal audit plan.
  • Actively participate in discussions on decisions related to the appointment or removal of the Chief Audit Executive and their eventual adoption.
  • Actively participate in discussions regarding the audit chief’s fees and eventually approve them.
  • Make appropriate inquiries from management and the chief audit executive to determine if there are any inappropriate restrictions on scope or resources.
  • Drafting and approving a statement that the Chief Audit Executive will have unrestricted access to the Board of Directors and communicate and interact with it directly without the presence of the management.
  • Drafting and approving an authorization for the activity to have free and unrestricted access to jobs, records, property, and personnel related to the implementation of any task, taking into account the responsibility for the confidentiality and protection of records and information.

4️⃣ Independence and objectivity – the charter should include

  • A text stating that the chief audit executive will ensure that the internal audit activity is kept away from circumstances that threaten the ability of the activity to carry out its activities in an unbiased manner. In the event that there is a breach of independence or objectivity in reality or appearance, the Chief Audit Executive will disclose the details of this breach to the concerned parties.
  • A text stating that the internal audit activity will not assume any direct operational responsibility and has no authority over any of the activities subject to audit.
  • A text stating that if the chief audit executive assumed or was expected to assume roles or responsibilities or both that fall outside the scope of the audit, preventive measures will be put in place to limit the violation of independence and objectivity.
  • Requiring that the chief audit executive of the board of directors at least annually be independent of the internal audit activity.

5️⃣ Scope of the internal audit activity – the charter should include

  • A text that the scope of internal audit activities includes, but is not limited to, objective examinations of evidence for the purpose of providing independent assessments of the adequacy and effectiveness of governance, risk management, and control processes.
  • A text stating that the chief audit executive will submit periodic reports to the senior management and the board of directors on the results of the department and the work that leads to the activity.

6️⃣ Liability – the charter should include provisions regarding liability for

  • Submit a risk-based internal audit plan at least annually.
  • Informing senior management and the board of directors of the impact of resource constraints on the plan.
  • Ensuring that the internal audit activity obtains the appropriate resources in terms of merit and skill.
  • Managing the activity in a manner appropriate to it to fulfill the assignment assigned to it.
  • Ensure compliance with IIA standards.
  • Communicate the results of his work and follow up on the agreed corrective actions.
  • Coordination with other assurance service providers.

7️⃣ Quality Assurance and Improvement Program – the charter should include

  • A text that the internal audit activity will ensure the existence of quality assurance and improvement program that includes all aspects of the internal audit activity, including its assessment of compliance with the standards of the Institute of Internal Auditors.
  • A requirement that the CEO periodically inform the results of the quality assurance and improvement program to senior management and the board of directors, and that he obtain an external evaluation of the activity at least once every five years.
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