Audit Charter

An audit charter is a formal document that defines the purpose, authority, and responsibility of the internal audit activity within an organization. It serves as a foundational document that outlines how internal audit will operate and contribute to the organization's success.

Key Components of an Audit Charter:

• Purpose: Clearly states the mission and objectives of the internal audit function.
• Authority: Defines the scope of internal audit's work and its access to records, personnel, and physical assets.
• Responsibility: Outlines the duties and obligations of the internal audit team.
• Independence: Emphasizes the organizational independence of internal audit and its freedom from management interference.
• Objectivity: Reinforces the importance of unbiased and impartial assessments by internal auditors.
• Scope: Specifies the areas and activities that internal audit will review and evaluate.
• Standards: States the professional standards that internal audit will adhere to, such as the International Standards for the Professional Practice of Internal Auditing.
• Reporting: Describes the reporting lines and communication channels for internal audit findings and recommendations.

Benefits of an Audit Charter:

• Clarity: Provides a clear understanding of internal audit's role and responsibilities within the organization.
• Credibility: Enhances the credibility and authority of the internal audit function.
• Support: Demonstrates management's commitment to an effective internal audit function.
• Guidance: Serves as a guide for internal audit activities and resource allocation.
• Accountability: Establishes a framework for evaluating the performance of internal audit.

The Institute of Internal Auditors (IIA) emphasizes the importance of an audit charter and provides guidance on its development.