CIA-1 - Foundations of Internal Auditing - Section A.3

Recognize the requirements of an internal audit charter, including the components required by the Global Internal Audit Standards and the importance of board approval.

Identify the internal audit charter as the formal document that records the function's purpose, authority, and responsibility, and list the components the Global Internal Audit Standards require it to contain. Recognise that the charter must be discussed with the board and senior management and formally approved by the board, giving the function its standing within the organisation.

Internal audit charterBoard approvalGlobal Internal Audit Standards

Practice question for this objective

Free sampleFoundations of Internal Auditingeasy

Under the Global Internal Audit Standards, before an internal audit charter can take effect, whose formal approval of the charter is required?

AThe chief audit executive, who issues it under delegated authority from management.
BSenior management alone, whose sign-off establishes the function's operating authority.
CThe board, whose formal approval of the charter is required by the Standards. Correct
DThe external audit firm, whose annual review ratifies the document each year.

Board approval of the internal audit charter is a requirement of the Global Internal Audit Standards. Board approval anchors internal audit's independence and mandate at the highest governance level, which is why the Standards place the charter's formal approval with the board rather than with management.

Why A is wrong: The chief audit executive drafts and proposes the charter, but issuing it under delegated authority is not the approval step the Standards require.

Why B is wrong: Senior management is consulted on the charter, yet management sign-off by itself does not satisfy the Standards, which reserve formal approval for the board.

Why C is correct: The Standards require the board to formally approve the internal audit charter, reinforcing the function's independence and its accountability to the board.

Why D is wrong: External auditors may read the charter, but they have no authority to approve or ratify it, so this confuses an external assurance provider with the board.

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