TOPIC 4 INTERNAL AUDIT CHARTER-H.T.DƯƠNG.pptx

AUDIT

1. Present: Hoang Thuy Duong INTERNAL AUDIT CHARTER Internal and Operational Auditing

2. 1. Introduction One of the great challenges every organization faces is assuring efficient and effective risk management ― those policies and processes designed to leverage or mitigate risks to the organization’s advantage. When done well, internal audit provides that assurance as part of its role to protect and enhance organizational value. For internal audit to operate at the highest levels, it must have clearly defined and articulated marching orders from the governing body and management. This is most easily achieved with a well-designed internal audit charter.

3. 2. Purpose of Internal Auditing 1 Provide Assurance Evaluate the effectiveness of risk management, control, and governance processes. 2 Offer Recommendations Identify opportunities for improving operations and promoting efficient use of resources. 3 Promote Accountability Ensure compliance with policies, procedures, and regulatory requirements.

4. 3. Scope of Internal Auditing Financial Review the accuracy and reliability of financial records and reporting. Operational Assess the efficiency and effectiveness of business processes. Compliance Ensure adherence to policies, procedures, and regulatory requirements.

5. 4. Responsibilities of Internal Auditing Risk Assessment Identify, analyze, and prioritize potential risks to the organization. Audit Planning Develop and execute a comprehensive audit plan based on risk assessments. Reporting and Recommendations Communicate audit findings, conclusions, and recommendations to management and the board. Continuous Improvement Monitor the implementation of corrective actions and provide ongoing support.

6. Ensuring independence from management to objectively assess risks, controls, and compliance within the organization. 3. Clearly defined scope of audit activities, including the ability to assess all aspects of the organization's operations, processes, and systems. 5. Authority to make recommendations for improving internal controls, processes, and risk management practices based on audit findings. 2. Authority to access all relevant records, personnel, and physical locations necessary to conduct audits effectively. 4. Authority to report audit findings, recommendations, and observations directly to senior management and the audit committee. 7. Authority to request and allocate resources, including personnel, technology, and training, to fulfill audit objectives effectively. 5. Authority 6. Authority to monitor and follow up on the implementation of audit recommendations to ensure corrective actions are taken effectively. 8. Authority to evaluate compliance with applicable laws, regulations, policies, and procedures.

7. 6. Independence and Objectivity Organizational Independence Internal audit reports directly to the audit committee or board of directors, ensuring independence from management. Professional Objectivity Internal auditors maintain an unbiased and impartial mindset, free from conflicts of interest. Unrestricted Access Internal auditors have full access to records, personnel, and resources necessary to perform their duties.

8. 7. Internal audit report and monitoring Internal Audit Reporting: The charter specifies the format, frequency, and distribution of internal audit reports. It defines the audience for these reports, which typically include senior management, the audit committee, and relevant stakeholders. The content of the reports may include audit findings, recommendations, and management responses. Additionally, the charter outlines the process for documenting and communicating audit results, ensuring clarity and relevance to key decision-makers. Monitoring: The charter delineates the mechanisms for monitoring the implementation of audit recommendations and the effectiveness of corrective actions. This includes establishing timelines, responsibilities, and tracking mechanisms to ensure timely and appropriate responses to audit findings. Moreover, the charter may specify procedures for conducting follow-up audits to assess the progress made in addressing identified issues. By integrating monitoring processes into the internal audit framework, the charter facilitates the organization's ability to identify and mitigate risks, enhance controls, and drive continuous improvement initiatives.

9. Data Protection: Ensuring that all information obtained during audits is handled securely, with access restricted to authorized personnel only. 6. Confidentiality 2. Non-Disclosure: Prohibiting the disclosure of audit findings, documents, or discussions to unauthorized individuals or entities outside the audit process. 3. Conflict Resolution: Establishing protocols for resolving conflicts between the need for transparency and the requirement to maintain confidentiality, particularly in cases involving legal or regulatory requirements. 4. Ethical Standards: Reiterating the importance of ethical behavior among audit team members, emphasizing the duty to uphold confidentiality in all interactions and communications. 5. Legal Compliance: Adhering to relevant laws and regulations regarding the protection of confidential information, including privacy laws and industry-specific regulations. 6. Consequences of Breach: Clearly outlining the consequences of breaching confidentiality, including disciplinary action or legal repercussions, to deter unauthorized disclosure.

10. 7. Organization and sources of internal audit function Organizational Structure: The charter outlines the placement of the internal audit function within the organizational hierarchy, specifying reporting lines, such as to the CEO, board of directors, or audit committee. 2. Staffing and Expertise: It delineates the staffing levels, qualifications, and expertise required for the internal audit team, ensuring they possess the necessary skills to effectively execute audits across various areas of the organization. 3. Budget and Resources: The charter defines the budgetary allocations and resources available to support the internal audit function, including technology, training, and external expertise, to enable thorough and comprehensive audits. 4. Independence and Objectivity: It emphasizes the independence of the internal audit function from operational activities, ensuring objectivity in assessing risks, controls, and governance processes within the organization. 5. Authority and Access: The charter grants the internal audit function the necessary authority and access to information, systems, and personnel across the organization to conduct audits effectively and efficiently.

11. 8. Internal Audit plan Types of audit services offered by internal audit: Regular audits—these are usually scheduled as part of the annual schedule, but may come up during the year. Follow-up audits—these are usually scheduled as part of the annual schedule. The International Standards for the Professional Practice of Internal Auditing require follow-up work. Consultations reviews—these are requests from interested parties. Requests can be scheduled as part of the annual audit schedule or come up during the year. Special investigations—these come up during the year when interested parties contact the internal auditor where irregularities or inappropriate conduct is identified. Requests for advice—these come up during the year when interested parties contact the internal auditor with questions or for advice.

12. 9. Periodic assessment Objective Evaluation: The QAIP involves regular assessments to evaluate the internal audit activities objectively. This includes reviewing processes, procedures, and performance against established standards. 2. Continuous Improvement: Periodic assessments drive continuous improvement within the internal audit function by identifying areas for enhancement or refinement. This fosters a culture of learning and adaptation to changing business environments. 3. Compliance and Standards: The assessments ensure compliance with relevant laws, regulations, and professional standards. They also verify adherence to the organization's policies and procedures.

13. Periodic assessment 4. Stakeholder Confidence: By demonstrating a commitment to quality through periodic assessments, the internal audit function enhances stakeholder confidence in its reliability, independence, and competence. 5. Risk Mitigation: Regular evaluations help identify potential risks and deficiencies in the internal audit process, enabling timely corrective actions to mitigate risks and strengthen controls. 6. Documentation and Reporting: The results of periodic assessments are documented and reported to appropriate stakeholders, such as the audit committee, to provide transparency and accountability regarding the internal audit function's performance and improvements made.

14. 10. Approval and amendment of the charter The CAE has the responsibility to review the internal audit charter regularly in line with the International Professional Practice Framework of internal auditing, and present the same to the audit committee of the organization, council/board, and management who have been delegated the authority to approve and amend the organization’s internal audit charter.

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