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Internal audit - Coggle Diagram
Internal audit
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An independent objective assurance and consulting activity designed to add value and improve an organisation's operations
Helps organisations accomplish their objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes
FRC Guidance suggests the need for an internal audit function depends on factors such as company size, diversity and complexity of activities and number of employees, as well as cost-benefit considerations
The main benefits of co-sourcing or out-sourcing the internal audit function are that the organisation can leverage external resources, technology, skills and experience which may not be available to it with an in house team
Where an internal audit exists, the 2017 Code requires the audit committee to monitor and review the effectiveness of the internal audit function. Where there is no internal audit function, the audit committee should consider annually whether there is a need for one and make a recommendation to the board. The reasons why there is no internal audit function should be explained in the relevant section of the annual report
FRC guidance comments that in the absence of an internal audit function, other processes may need to be applied to provide assurance to management, the audit committee and the board that the system of internal control is functioning as intended. In these cirumstances, the audit committee will need to assess whether such processes provide sufficient and objective assurance