6 the appointment or dismissal of the head of

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6. The appointment or dismissal of the head of internal audit should be with the concurrence of the audit committee. Chapter 2 Role and Function of Internal Audit 1. The objective of internal audit is to assist members of executive and senior management in the effective discharge of their duties and responsibilities. To this end, internal audit furnishes them with analyses, appraisals, recommendations, counsel and information concerning the activities reviewed. Recommendations Companies should have an effective internal audit function that has the respect and co-operation of both the board and management. Where the board, in its discretion, decides not to establish an internal audit function, full reasons must be disclosed in the company’s annual report, with an explanation as to how assurance of effective internal controls, processes and systems will be obtained. Consistent with the Institute of Internal Auditors’ (“IIA”) definition of internal auditing in an internal audit charter approved by the board, the purpose, authority and responsibility of the internal audit activity should be formally defined. Internal audit should report at a level within the company that allows it fully to accomplish its responsibilities. The head of internal audit should report administratively to the chief executive officer, and should have ready and regular access to the chairperson of the company and the chairperson of the audit committee. Internal audit should report at all audit committee meetings. The appointment or dismissal of the head of internal audit should be with the concurrence of the audit committee.
Page 88 2. The role, function, scope and professional standards of an internal audit function are succinctly documented and codified by the IIA with reference to international best practices. 3. An effective internal audit function should provide: assurance that the management processes are adequate to identify and monitor significant risks; confirmation of the effective operation of the established internal control systems; credible processes for feedback on risk management and assurance; and objective confirmation that the board receives the right quality of assurance and information from management and that this information is reliable. 4. Internal audit is performed in diverse environments and within companies that vary in purpose, size and structure. These differences may affect the practice of internal audit in each environment. The implementation of common standards govern the way in which the internal audit function carries out assigned responsibilities. Compliance with the published standards is essential before the responsibilities of internal auditors can be properly met.

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