Introduction
- As discussed in my previous article, currently there are 18 Standards on Internal Audit (SIA’s) issued by Institute of Chartered Accountants of India (ICAI). One among these standards is SIA 220 “Conducting overall Internal Audit Planning”. It is rightly said that “By failing to prepare, you are preparing to fail”, hence planning plays an important role in accomplishing the audit.
- SIA 220 is not yet notified by Institute of Chartered Accountants of India (ICAI), hence it is voluntary in nature.
- Before going into SIA 220 let’s learn the definition of Internal Audit which forms the crux of the standard. The definition is defined by ICAI in framework governing internal Audit.
- “Internal Audit” provides independent assurance on the effectiveness of internal controls and risk management processes to enhance governance and achieve organizational objectives.
- Institute of Internal Auditors (IIA) also defined “Internal Audit”. According to IIA Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations.
- To conduct an Internal Audit, a plan is to be formulated. Internal audit planning is conducted at two levels:
- An overall internal audit plan for the entire entity is prepared for a given period (usually a year) and presented to the highest governing body responsible for internal audits, normally, the Board of Directors, or the Audit Committee.
- Several specific internal audit plans are prepared for individual assignments to be undertaken covering some part of the entity and presented to the Chief Internal Auditor. Planning of the same is covered under SIA 310.
- In the case of Companies under Companies Act, 2013, which are subject to internal Audit as per section 138. it is a legal requirement for the Audit Committee or its Board of Directors to formulate the overall internal audit plan of the company.
Read more: SIA 220 - Conducting an Overall Internal Audit Planning
