Internal audit

Changes in internal audit standards

Changes to the internal audit standards will require even more of internal auditors.

A new version of the international standards for the professional practice of internal auditing came into force on 1 January, introducing some material changes. Internal auditors will now be directed to follow even more closely changes in the external environment and company’s strategic vision.

The amendments to standards 1210, 2000, 2100, 2450 and 2200 will require internal auditors to lend even more consideration to company-related activities, societal and environmental trends and salient topics that impact the company.

Internal auditor as adviser

The interpretation of standard 2000 states that “internal audit activity adds value to the organisation and its stakeholders when it considers strategies, objectives and risks”. The new wording of standard 2100 states that “internal audit credibility and value are enhanced when auditors are proactive and their evaluations offer new insights and consider future impact”.

It is thus extremely important that internal auditors understand the company’s area of activity, and are able to have say in planning company strategies and bring out the risks related thereto. It is no longer enough just to perform audits for giving assurance; increasingly internal auditors are expected to provide substantive advice in strategic matters.

Changes affect reporting as well

A key change is an addition to the interpretation of standard 2060. It is now very clearly stated what the internal audit must report to the supervisory board. It must be stressed that the standard does not directly specify reporting to the audit committee as an alternative but based on the new implementation guide for standard 1111, the audit committee replaces direct interaction with the supervisory board. The implementation guide also notes that in addition to participating in audit committee meetings, the internal audit executive should have the possibility of providing information to the supervisory board, including at least meeting with the board or audit committee – without senior management present – at least annually. The implementation guide also notes that if such direct interaction with board or audit committee is not enabled, the information must be sent to the board in writing.

In addition, the quality assurance and improvement program standards 1300, 1312 and 1320 were updated. Wordings were revised and a description of the quality assurance reporting structure was brought in.

There were also changes to other standards. We advise all internal auditors to read the revised standards and update their procedural descriptions. If needed, it should be discussed with the audit committee and the supervisory board whether and how the professional work of internal audit should change in the light of the new standards.

Author: Siiri Antsmäe