| Internal audit has always been of immense significance to the corporate world. From being a cross check over the accounts of the organization, internal audit has, over the years moved to being a strong indispensable control tool in the hands of the management, which can help it immensely add to the shareholders’ value. Internal audit can significantly help the management improve its operational efficiency through improved risk management and control systems and strengthening the overall governance mechanism of the entity. Internal audit today has spread its reach to all the functional areas of management be it HR, Marketing, Production and is not restricted to just Finance and Accounts. With growing competition and increasing expectations of the stakeholders, the importance of internal audit is also gaining ground. A large number of the members of the Institute are involved in carrying out internal audit engagements. The Institute has, from time to time, issued general and industry specific guidelines on internal audit practices for the guidance of the members. However, till date, no formal standards on internal audit under the authority of the Council have been issued. |
| Accordingly, the Council of the Institute of Chartered Accountants of India at its 240th meeting held on 5th February 2004 had constituted the Committee on Internal Audit (a non standing Committee of the Institute). The main function of the Committee on Internal Audit would, among other things, is to review the existing internal audit practices in India and to develop Standards on Internal Audit (SIAs). The SIAs would aim to codify the best practices in the area of internal audit and would also serve to provide a benchmark of the performance of the internal audit services. The SIAs would be issued under the authority of the Council. The Committee would also issue guidance notes on issues relating to internal audit. |
| The Committee on Internal Audit has recently, under the authority of the Council, issued the Preface to the Standards and Guidance Notes on Internal Audit. The Preface, for the first time, formalizes the definition of internal audit, as viewed by the Institute of Chartered Accountants of India. The said definition is in tune with the current philosophy in the area of internal audit i.e., its role in strengthening the overall governance mechanism of the entity, including the strategic risk management and internal control system. |
| The Preface also outlines certain fundamental issues in relation to standards and guidance notes on internal audit, such as, the scope of the standards and guidance notes on internal audit and their status – Standards on Internal Audit being mandatory and the Guidance Notes on Internal Audit being recommendatory in nature, as also the implications in case of departures from the Standards on Internal Audit, the basic procedure for issuing the standards and guidance notes on internal audit and the date of coming into force of the particular Standard on Internal Audit. |
| The Preface has been published in the November 2004 issue of the Journal and is also available on the website of the Institute (www.icai.org) under the main menu Resources and sub menu Standards on Internal Audit. The Preface can also be viewed on the knowledge page of the Committee on Internal Audit on the website of the Institute. |
