Background: An effective relationship between the Audit Committee and the Internal Auditors is fundamental to the success of the internal audit function. It is important for audit committees to assess whether internal audit priorities, such as monitoring critical controls and developing an audit plan focused on risks identified in the enterprise risk management program, are aligned with those of the audit committee. At some companies, internal audit evaluates and considers suggestions to improve operations and processes

The relationship between the Audit Committee and the Internal Audit function is essential to develop that relationship into a trusting and dynamic partnership. An open relationship helps build an effective and efficient Internal audit activity that provides assurance to the audit committee and the Board of Directors about the organization’s risk management framework and internal controls and can help the organization reach its strategic goals and objectives.

Audit Committee

1) What is the role of the Audit Committee in internal audit?

The audit committee plays a crucial role in providing oversight of the internal audit function within an organization. Some of the key responsibilities and roles of the audit committee in relation to internal audit include:

  • Review and Approval of Internal Audit’s Remit: The audit committee reviews and approves the internal audit’s remit, prioritizing its work, and monitoring the effectiveness of the organization’s internal audit function.
  • Oversight of Internal Controls: It ensures that internal audit is free to work independently and objectively, particularly in assessing the organization’s internal controls.
  • Appointment and Oversight of the Auditor: The audit committee is responsible for the appointment, compensation, and oversight of the work of the auditor, and it meets separately with external auditors to discuss relevant matters.
  • Approval of Internal Audit Charter and Special Reviews: The committee provides input and approves the written charter for the internal audit function, including periodic review and updating. It may also participate in special reviews and investigations, such as fraud or suspected fraud.
  • External Assessment: Audit committees may seek an external assessment of the internal audit department to effectively oversee its function and ensure it meets professional internal audit standards

2) How Audit committee looks into Internal Audit 

  • The audit committee sees the internal audit function as an important tool for providing assurance on governance and internal control systems. It works with the internal audit function to agree on the scope of its work, priorities, and resources, and monitors and reviews its effectiveness
  • The committee also ensures that the head of internal audit has direct access to the board chairman and is accountable to the audit committee.
  • Additionally, the audit committee approves the appointment or termination of the head of internal audit and reviews and approves the internal audit plan, staffing, and organization.
  • It also meets with internal auditors and management on a periodic basis to discuss matters of concern. The audit committee’s oversight of the internal audit function is crucial, and it should assess whether internal audit’s priorities are aligned with those of the committee and whether the internal audit activity is sufficiently resourced and independent.
  • Furthermore, the audit committee should provide input and approve the written charter for the internal audit function, including periodic review and updating, and participate in special reviews and investigations, including fraud or suspected fraud.

Overall, the audit committee plays a significant role in supporting and overseeing the internal audit function, ensuring its independence, effectiveness, and alignment with the organization’s objectives and risks.

3) Questions for Audit Committees to consider.

  • Does internal audit have a clearly articulated strategy that is reviewed and approved by the audit committee periodically?
  • Does internal audit have a clear set of performance expectations that are aligned with the success measures of the audit committee and measured and reported to the audit committee?
  • Does internal audit have a charter that is reviewed and approved by the audit committee periodically?
  • Does internal audit operate in accordance with its charter?
  • Is internal audit effective in using advanced technologies, such as data analytics, to improve audit quality?
  • Is internal audit flexible and dynamic in addressing new risks promptly and meeting the needs of the audit committee?
  • Is internal audit funded and adequately staffed with the appropriate mix of professionals needed to achieve its objectives?
  • Is the level of assurance provided by internal audit and its interaction with other assurance sources clear and appropriate for the audit committee?
  • Are issues identified and reported by internal audit highlighted to the audit committee appropriately, and is the progress of remediation tracked and reported?
  • Are reports and other communications from internal audit to the audit committee of an appropriate standard and do they provide value?
  • Does internal audit meet with the independent auditor regularly to discuss risk assessments, the scope of procedures, or opportunities to achieve greater efficiencies and effectiveness in the company’s audit services?
  • Does the internal audit organize or perform peer reviews or self- assessments of its performance and report the results to the audit committee?

4) Conclusion – 

An internal audit and an audit committee serve different purposes and have different roles, but they are related in that they both play important roles in ensuring the accuracy and reliability of a company’s financial reporting and internal controls.


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Umesh Vishwakarma Manager
Varsha Dhake Manager
Yash R. Mishra Associate Consultant

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March 2024