A new code for internal auditors was launched today as an attempt to help prevent corporate scandals such as the collapse of outsourcer Carillion and cake shop Patisserie Valerie which went to the wall in January 2018 and 2019 respectively.
The new code from the Chartered Institute of Internal Auditors was launched today following a public consultation.
Key recommendations include:
- 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 chief executive 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.
- 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 chair of the steering committee that drew up the report Brendan Nelson said: “High-profile corporate collapses linked to governance deficiencies have led to a wide-ranging review of the audit and corporate governance framework.
“Strong, effective and well-resourced internal audit functions have a central role to play in supporting boards to better manage and mitigate the risks they face.
“I urge boards, and in particular audit committees, to apply appropriately the internal audit code of practice to increase the effectiveness of their internal audit functions, in the pursuit of stronger corporate governance and risk management.”
The institute said it would review the code after two years to assess its impact and take up.