Statement of Responsibilities of Internal Auditing
The purpose of this statement is to provide in summary form a general understanding of the role and responsibilities of internal auditing. For more specific guidance, readers should refer to the Standards for the Professional Practice of Internal Auditing.
NATURE
Internal auditing is an independent appraisal activity established within an organization as a service to the organization. It is a control which functions by examining and evaluating the adequacy and effectiveness of other controls.
OBJECTIVE AND SCOPE
The objective of internal auditing is to assist members of the organization in the effective discharge of their responsibilities. To this end, internal auditing furnishes them with analyses, appraisals, recommendations, counsel, and information concerning the activities reviewed. The audit objective includes promoting effective control at reasonable cost.
The scope of internal auditing encompasses the examination and evaluation of the adequacy and effectiveness of the organization's system of internal control and the quality of performance in carrying out assigned responsibilities. The scope of internal auditing includes:
*Reviewing the reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
*Reviewing the systems established to ensure compliance with those policies, plans, procedures, laws, and regulations which could have a significant impact on operations and reports, and determining whether the organization is in compliance.
*Reviewing the means of safeguarding assets and, as appropriate, verifying the existence of such assets.
*Appraising the economy and efficiency with which resources are employed.
*Reviewing operations or programs to ascertain whether results are consistent with established objectives and goals and whether the operations or programs are being carried out as planned.
RESPONSIBILITY AND AUTHORITY
Internal auditing functions under the policies established by management and the board. The purpose, authority and responsibility of the internal auditing department should be defined in a formal written document (charter), approved by management, and accepted by the board. The charter should make clear the purposes of the internal auditing department, specify the unrestricted scope of its work, and declare that auditors are to have no authority or responsibility for the activities they audit.
The responsibility of internal auditing is to serve the organization in a manner that is consistent with the Standards for the Professional Practice of Internal Auditing and with professional standards of conduct such as the Code of Ethics of The Institute of Internal Auditors, Inc. This responsibility includes coordinating internal audit activities with others so as to best achieve the audit objectives and the objectives of the organization.
INDEPENDENCE
Internal auditors should be independent of the activities they audit. Internal auditors are independent when they can carry out their work freely and objectively. Independence permits internal auditors to render the impartial and unbiased judgments essential to the proper conduct of audits. It is achieved through organizational status and objectivity.
Organizational status should be sufficient to assure a broad range of audit coverage, and adequate consideration of and effective action on audit findings and recommendations.
Objectivity requires that internal auditors have an independent mental attitude, and an honest belief in their work product. Drafting procedures, designing, installing, and operating systems, are not audit functions. Performing such activities is presumed to impair audit objectivity.
The Statement of Responsibilities of Internal Auditors was originally issued by The Institute of Internal Auditors in 1947. The current Statement, revised in 1981, embodies the concepts previously established and includes such changes as are deemed advisable in fight of the present status of the profession.
