Documenting independence and objectivity: a well-written charter provides the framework and purpose for internal audit conduct
Many companies accept the thought of an internal audit charter to document when an internal audit is supposed to be independent and objective. An internal audit charter is a formal document that outlines the purpose, authority, and responsibility. It gives the internal audit department a place inside the company that gives a formal written agreement about the position of the company to management and the board.
It is expected for an internal auditor to be independent in appearance and in the information that is provided when completing their job in the organization as it is reflected as a part of management. Objectivity is the auditor’s balanced approach with making sure that his work is not compromised and free ...view middle of the document...
Damage to an internal auditor department’s independence and objectivity will arise when there are restricted limits to the records they have access to, performance of procedures and the approval of staffing and financial backing, these limitations should be reported to the proper party within the company. An internal charter can minimize these limitations to ensure there is independence and objectivity even though it cannot prevent impairment from happening.
An internal audit charter must create an outline identifying, handling, and the steps taken for remedying procedures for when issues arise in the company while covering independence and objectivity along with the responsibility of internal audit function. The charter is created by the CAE and the internal audit department with the approval from the CEO and acceptance from the board of directors or audit committee to confirm that it meets compliance and the objective of the company.
The mission statement of the charter should include the internal audit’s promise to have independence and be objective. It should also state that the CAE will report to the board of directors who then informs the CEO. This statement must contain how to handle conflicts between the CAE and persons within the business and what steps should be taken to handle these conflicts. The charter should also state that the internal audit will not be influenced by individuals within the company when they are doing their obligations and what consequences will be taken if the internal auditor lacks that independence and objectivity. Within that charter, it should also include some examples of their operational duties, it should also include steps that should be taken if an internal auditor should take on any role that will count as nonaudit work.
Independence and objectivity plays an important role for an internal auditor, so adapting an internal audit charter, companies can add different procedures to help relieve any impact that might arise if there is no independence and objectivity.