The Chartered Institute of Internal Auditors (IIA) has published a report aimed at strengthening the power of internal audits, after a UK Parliamentary Commission called for improvements in the internal auditing systems of financial firms.
The report, ‘Effective Internal Audit in the Financial Services Sector’, suggested the scope of internal audit should be unrestricted to allow auditors to assess the management of any risk.
In particular, it called for internal audits to assess whether an organisation’s processes and actions are in line with its values, ethics, risk appetite and other policies.
IIA also recommended that internal audit should be adequately resourced, skilled and quality assured and that the chair of the audit committee should be the primary internal reporting line to maximise independence.
IIA chief executive Ian Peters said this guidance’s "primary target is not internal audit practitioners, but boards, audit committees and senior executives," as many of the recommendations would need to be implemented by them.
IIA’s report stated that a chief internal auditor should have sufficient standing and authority to challenge the companies’ executive and communicate its concerns to the board.
The report was produced by an independent committee chaired by UK Financial Reporting Council board member Roger Marshall, following a consultation process which involved stakeholders of the UK’s financial sector.
Peters added the institute could produce similar advice for other sectors in future.