Internal audit’s role in modern corporate governance
Thought leadership series

Risk and Advisory Services

Internal audit’s role in modern corporate governance

Recent events have highlighted the critical role of boards of directors in promoting good corporate governance. In particular, boards are being charged with ultimate responsibility for the effectiveness of their organisations’ internal control systems. An effective internal audit function plays a key role in assisting the board to discharge its governance responsibilities. Yet how does the board – and its audit committee – satisfy itself that internal audit is functioning effectively and efficiently?

The board’s responsibility for internal controls
Through working with a broad …show more content…

– Internal audit has a strong risk identification and planning methodology and delivers a high quality service. – Technology is used appropriately to enhance the provision of internal audit services. – An appropriate framework is in place to measure internal audit’s performance. – Internal audit develops and manages appropriate relationships with its key stakeholders.

Does internal audit have the right people strategy to deliver its mission/objectives? – Internal audit’s core competencies are directly related to its mission, role and scope of work. – Internal audit’s staffing strategy reflects its mission, role and required competencies. – The strategy is sufficiently flexible to respond to changes in demand.

I n t e r n a l a u d i t ’s r o l e i n m o d e r n c o r p o r a t e g ove r n a n c e

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In the UK, a recent report by Sir Robert Smith on the Combined Code Guidance for Audit Committees (the Smith Report) states that “…management is responsible for the identification, assessment, management and monitoring of risk, for developing, operating and monitoring the system of internal control, and for providing assurance to the board that it has done so – except where the board is expressly responsible for reviewing the effectiveness of the internal control and risk management systems.” 1 In Australia, the ASX Principles of Good Corporate Governance has a bet each way. It recommends that internal audit