Summary AUI 2601 SUMMARISED NOTES

AUI 2601 SUMMARISED NOTES The purpose of the internal audit activity Internal auditors need to make a meaningful contribution to meet the needs of the organisation, which is mainly to achieve its objectives. The following features need to be included in the internal audit charter to grant them the necessary authority: Access to the books, records, vouchers and accounts This authority is included because the internal auditor must have access to all the information pertaining to the audit assignment at all times Obtaining information and explanations It is virtually impossible for an internal auditor to possess all the relevant knowledge required at all times. They should under no circumstances accept an explanation unless quite convinced of its correctness and, where possible, should always substantiate information received through explanations by auditees. Attending meetings Internal auditors need to keep abreast of matters concerning planning and policies within the organisation, so that they are able to perform their duties. Believing trusted officials Internal auditors are entitled to place reliance on any information supplied to them by trusted employees in the organisation. Independence of the internal auditor To prevent any possibility of his or her integrity, findings and recommendations being questioned, the internal auditor has to be independent of the staff and the operational activities on which he or she reports (refer to Standard 1000, The Internal Audit Charter). Organisational independence and objectivity are the primary means that internal auditors use to ensure their independence from the staff of the organisation and its normal business activities (refer to Standard 1100). The organisational independence and individual objectivity of internal auditors must be such that they always report to the highest authority. This is the only reliable way of ensuring that they remain independent and are respected throughout the hierarchy of the organisation. The audit committee plays an important role in making sure that the internal audit activity is independent. Constraints on the internal auditor Management can impose constraints on the internal auditor regarding access to records, explanations, independence, and so on. Unlike the external auditor, the internal auditor has no legal recourse in this regard. Therefore, where the internal auditor’s powers are restricted by management, he or she should state in the report that certain constraints were imposed on the audit, and explain how these affected the findings. The auditor should, however, continue to try to persuade management not to impose unnecessary restrictions, as these prevent him or her from carrying out his or her duties as effectively as possible. In the ideal reporting framework, internal audit would also be in a position to report such constraints to the audit committee of the board of directors. THE RESPONSIBILITY OF AN INTERNAL AUDITOR The objective of internal auditing is to assist members of the organisation in the effective discharge of their responsibilities and to add value and improve the organisation's risk management, control and governance processes.