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04 Internal Audit Charter v2

The document outlines an Internal Audit Charter intended as a template for clients to establish their own audit framework. It details the purpose, responsibilities, authority, and operating principles of the Internal Audit function, emphasizing independence and collaboration with management. The charter serves to formalize the internal audit's role in risk management and reporting to the Audit Committee.

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mjpaule
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10 views3 pages

04 Internal Audit Charter v2

The document outlines an Internal Audit Charter intended as a template for clients to establish their own audit framework. It details the purpose, responsibilities, authority, and operating principles of the Internal Audit function, emphasizing independence and collaboration with management. The charter serves to formalize the internal audit's role in risk management and reporting to the Audit Committee.

Uploaded by

mjpaule
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Purpose  To provide an example Internal Audit Charter that may be


provided to the client as a starting point for the client’s
adopted Internal Audit Charter.
Responsibili  Potentially drafted by KPMG but ultimately owned by the client’s
ty project sponsor and endorsed by the client’s audit committee.
Usage  The objective of the Internal Audit Charter is to formalize the basis
of operation of Internal Audit during the engagement and provides
a formal management endorsement of this basis of operation.
 The content of this charter should be tailored to the client and
should be consistent with the content of the engagement letter.
However, the Internal Audit Charter is ultimately owned by the
client and does not represent an agreement between the client and
KPMG.
 This example document adheres to the plain paper reporting
guidance for outsource and co-source engagements found in the US
Internal Audit Services Manual and Internal Audit Methodology
Guide. Consult your local professional practice guidance and the
Global Brand and Regulatory Compliance guidelines to determine
the appropriate application of such guidance for your specific
engagement reporting needs.

Endorsed by the Audit Committee: [Date]


INTERNAL AUDIT CHARTER

Internal Audit Vision


To provide an internal audit function for Company ABC that is consistent with the leading practices.

Internal Audit Mission Statement


To provide an innovative, responsive, effective and highly valued internal audit function by providing
assistance to the board of director and executive management (“Management”) in their management of
the strategic risks to the organization.

To raise awareness of enterprise risk management and provide counsel to management, in order to assist
them to enhance the performance of the organization.

Role / Scope of work


This Charter represents the general authorization from Management to conduct a certain scope of work.

The specific authorization to perform the work is the Internal Audit Plan that is adopted by the Audit
Committee annually.

The scope of work contained in this plan will be based on Management’s assessment of the inherent risks
and the significance of these risks. Coverage should focus on risks that are most strategic and significant
to the organisation.

Internal Audit works alongside Management to identify threats to the achievement of [client name's]
objectives and assess the appropriateness of management's response to these risks.
Internal Audit may also carry out special reviews requested by Management.

Authority
On behalf of the Audit Committee, Internal Audit shall have full access to all records, properties and
personnel of [Internal Audit Client]. All staff and management of [Internal Audit Client] shall endeavour
to provide necessary assistance to, and cooperate with, staff of the Internal Audit function in the proper
performance of their duties.

Responsibility and accountability


The primary objective of Internal Audit is to assist the Management in the effective discharge of their
responsibilities. In order to carry out this responsibility, Internal Audit:

 Shall have unrestricted access to the Audit Committee, and if required, the Chairman of the
Board.

 Does not have any third party responsibilities on behalf of [Internal Audit client].

Endorsed by the Audit Committee: [Date]


Management is responsible for risk management and the operation and enhancement of internal control.
This includes responsibility for implementing the action plans as endorsed by the Audit Committee.

Objectivity and independence


[The Client’s]Internal Audit Department shall be independent (as defined by the 2004 Institute of Internal
Auditors (IIA) Standards) of the activities it reviews. Specifically Internal Audit teams may not review
areas where they were responsible for the design or operation of the area.
If we are involved in a complete outsourcing engagement the language in the parentheses needs to be
removed. In a co-sourcing engagement where this sample charter is to be used, then the engagement team
should consult with their local professional practice resource for guidance.
Operating principles
Internal Audit will

 Keep abreast of relevant best practice and new developments affecting their work and in matters
affecting [Internal Audit Client’s] activities.

 Respond to [Internal Audit Client’s] changing needs, will strive for continuous improvement and
maintain integrity in carrying out their activities.

 Work closely with Management to identify and assess risk and control, which will assist them in
the effective discharge of their responsibilities, while maintaining their independence within the
organization as defined by the 2004 IIA Standards.

 Coordinate its activities with those of the external auditors.

Reporting
Internal Audit shall report significant findings and any other matters in an Internal Audit reporting
format deemed appropriate to both Management and the Audit Committee.

When appropriate, reports will contain Management’s comments and their action plan designed to
address the issues raised.

Endorsement of the action plan is implicit in the formal endorsement of the report by the Audit
Committee.

Internal Audit shall monitor the progress of these action plans and provide periodic follow up reports.

Endorsed by the Audit Committee: [Date]

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