Course Overview

Course Objective:

To provide participants with a comprehensive understanding of how an effective Internal Audit function is established, governed, and positioned to add value to the organization. This module establishes the bedrock for all other Internal Audit activities.

1. Basis of Internal Audit Department Formation

• Regulatory and governance drivers for establishing Internal Audit: Companies Act, Code of Corporate Governance, SBP/SECP requirements, IIA Standards
• Need assessment: When and why an organization needs an independent Internal Audit function
• Internal Audit vs. other assurance functions: External Audit, Risk Management, Compliance, Internal Controls
• Sourcing models: In-house, outsourced, and co-sourced Internal Audit – advantages and limitations
• Key steps in setting up the department: Manpower planning, budget, methodology, and audit universe identification

1. Role & Value Proposition of Internal Audit

• Definition, purpose, and mission of Internal Audit as per IIA Global
• From policing to partnering: Evolution of Internal Audit role
• Assurance vs. Advisory services – striking the right balance
• Value proposition: How Internal Audit adds value through risk-based assurance, insights, and foresight
• Stakeholder expectations: What the Board, Audit Committee, and Senior Management expect from Internal Audit

1. Internal Audit Governance Structure

• Positioning of Internal Audit within the organization
• Roles and responsibilities of key stakeholders: Board of Directors, Board Audit Committee, CEO, and Chief Audit Executive [CAE]
• Interaction and coordination with other governance and assurance providers to avoid duplication and assurance gaps

1. Independence & Reporting Lines

• Functional reporting to the Board Audit Committee / Board of Directors vs. Administrative reporting to the CEO
• Reporting lines in practice: Direct access to the Audit Committee Chair, private meetings, and escalation protocols
• Objectivity of internal auditors and management of conflicts of interest

1. Drafting the Internal Audit Charter

• Purpose and importance of the Internal Audit Charter as the mandate for the function
• Mandatory elements as per IIA Standard 6.2: Purpose, Authority, Responsibility, and Position
• Defining scope of activities, types of services, and access rights
• Rights and responsibilities of the Board Audit Committee and management in relation to Internal Audit
• Approval, periodic review, and communication of the Charter

Learning Outcome:

By the end of this module, participants will be able to justify the need for an Internal Audit function, design its governance and reporting structure to ensure independence, and draft a best-practice Internal Audit Charter compliant with IIA Standards.