Statement of Responsibilities of the Internal Auditor
NATURE
Internal auditing is an independent appraisal activity within an organization for the review of operations as a service to management. It is a managerial control which functions by measuring and evaluating the effectiveness of other controls.
OBJECTIVE AND SCOPE
The objective of internal auditing is to assist all members of management in the effective discharge of their responsibilities by furnishing them with analyses, appraisals, recommendations, and pertinent comments concerning the activities reviewed. The internal auditor is concerned with any phase of business activity where he may be of service to management. This involves going beyond the accounting and financial records to obtain a full understanding of the operations under review. The attainment of this overall objective involves such activities as:
* Reviewing and appraising the soundness, adequacy, and application of accounting, financial, and other operating controls and promoting effective control at reasonable cost.
* Ascertaining the extent of compliance with established policies, plans, and procedures.
* Ascertaining the extent to which company assets are accounted for and safeguarded from losses of all kinds.
* Ascertaining the reliability of management data developed within the organization.
* Appraising the quality of performance in carrying out assigned responsibilities.
* Recommending operating improvements.
RESPONSIBILITY AND AUTHORITY
The responsibilities of internal auditing in the organization should be clearly established by management policy. The related authority should provide the internal auditor full access to all of the organization's records, properties, and personnel relevant to the subject under review. The internal auditor should be free to review and appraise policies, plans, procedures, and records. The internal auditor's responsibilities should be:
* To inform and advise management and to discharge this responsibility in a manner that is consistent with the Code of Ethics of The Institute of Internal Auditors.
* To coordinate his activities with others so as to best achieve his audit objectives and the objectives of the organization.
In performing his functions, an internal auditor has no direct responsibility for nor authority over any of the activities which he reviews. Therefore, the internal audit review and appraisal do not in any way relieve other persons in the organization of the responsibilities assigned to them.
INDEPENDENCE
Independence is essential to the effectiveness of internal auditing. This independence is obtained primarily through organizational status and objectivity:
* The organizational status of the internal auditing function and the support accorded to it by management are major determinants of its range and value. The head of the internal auditing function, therefore, should be responsible to an officer whose authority is sufficient to assure both a broad range of audit coverage and the adequate consideration of and effective action on the audit findings and recommendations.
* Objectivity is essential to the audit function. Therefore, an internal auditor should not develop and install procedures, prepare records, or engage in any other activity which he would normally review and appraise and which could reasonably be construed to compromise his independence. His objectivity need not be adversely affected,. however, by his determination and recommendation of the standards of control to be applied in the development of the systems and procedures under his review.
The Statement of Responsibilities of the Internal Auditor was originally issued by The Institute of Internal Auditors in 1947. The continuing development of the profession resulted in two revisions: 1957 and 1971. The current statement embodies the concepts previously established and includes such changes as are deemed advisable in light of the present status of the profession.
