The audit committee is responsible for overseeing the work of the internal audit function.
– As part of their obligation to ensure adequate and effective internal controls, the audit committee is responsible for overseeing the work of the internal audit function.
– Monitor and assess the role and effectiveness of the internal audit function within the company’s overall risk management system.
– Check the efficiency of internal audit by, for example, comparing actual costs and output against a target.
– Approve the appointment, or termination of appointment, of the head of internal audit.
– Ensure that the internal audit function has direct access to the board chairman and is accountable to the audit committee.
– Review and assess the annual internal audit work plan.
– Receive periodic reports about the work of the internal audit function.
– Review and monitor the response of management to internal audit findings.
– Ensure that recommendations made by internal audit are actioned.
– Help preserve the independence of the internal audit function from pressure or interference.
The Smith Guidance on Audit Committees recommends that the committee meets with internal auditors at least once a year, without management present, to discuss audit-related matters. If the company does not have an internal audit function:
– The committee should consider annually whether there is a need for an internal audit function and make a recommendation to the board, and
– The reasons for the absence of an internal audit function should be explained in the relevant section of the annual report.
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