Definition
The internal audit charter is a formal document that defines the internal audit mandate, including the function's purpose, authority, responsibility and organizational position. Under the Global Internal Audit Standards, the chief audit executive develops it, discusses it with the board and senior management and the board approves it. It also includes the Purpose of Internal Auditing and a commitment to follow the Standards. The CAE reviews the charter periodically.
Why it matters in an audit or review
The charter gives internal audit its right of access to records, people and property, and supports independence by setting its reporting line. An external auditor reads it when evaluating whether to use internal audit's work, since it shows who the function reports to and what it is allowed to do.
Example
Illustrative: a mid-sized company's charter says internal audit reports functionally to the audit committee and administratively to the CFO, and allows unrestricted access to records. The external auditor notes that the CFO's role may need a closer look at objectivity.
Common mistakes
- Using a charter that predates the 2024 Standards without updating it.
- Letting management approve the charter without board review.
Sources
- The IIA, Global Internal Audit Standards (2024), Domain III, Principle 6 and Standard 6.2, https://www.theiia.org
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error