The Chartered Institute of Internal Auditors has today published a new code to increase the effectiveness of internal audit functions. The Internal Audit Code of Practice (which can be downloaded here) will strengthen corporate governance following a series of high-profile collapses linked to governance deficiencies, including Carillion.
The Chartered Institute says the new code aims to increase the status, scope and skills of internal audit and makes 38 recommendations for businesses including:
Unrestricted access for internal audit so it is not stopped from looking at any part of the organisation it serves and key management information.
The right to attend and observe executive committee meetings.
A direct line to the CEO and a direct report to the Audit Committee Chair to increase the authority and status of internal audit.
The direct employment of Chief Internal Auditors in every business even when the internal audit function is outsourced. This is to ensure Chief Internal Auditors have sufficient and timely access to key management information and decisions.
Regular communication and sharing of information by the Chief Internal Auditor and the partner responsible for external audit to ensure both assurance functions carry out their duties effectively.
The Chartered Institute first called for feedback on the proposed code back in July 2019, where we reviewed the initial draft and provided a range of comments in a previous blog post which you can read here.
The Internal Audit Code of Practice was developed by an independent Steering Committee set up by the Chartered Institute of Internal Auditors and chaired by Brendan Nelson – Audit Committee Chair of BP. The final version of the code follows a 12-week public consultation exercise in which over one hundred stakeholders participated.
Brendan Nelson, Audit Committee Chair of BP and Chair of the Code of Practice Steering Committee, explains why we need a Code of Practice. You can watch the video below, or other videos by Brendan Nelson on the IIA website here.
As the Chartered Institute correctly points out, the Code of Practice should be applied in conjunction with the existing International Professional Practices Framework (IPPF) published by the Global Institute of Internal Auditors, which includes the International Standards for the Professional Practice of Internal Auditing (‘the IIA Standards’).
The Code builds on those Standards and seeks to increase the effectiveness and impact of internal audit within organisations by clarifying expectations and requirements.
A huge congratulations to all those involved. This is certainly a great thing for the Chartered Institute and the broader audit profession and I look forward to seeing the positive impact it has for all of us, not just as auditors, but within the broader business community.