ICAI’s Revised Definition of Internal Audit

Revised definition of the term ‘Internal Audit’ as per para 3 of the ICAI’s Framework Governing Internal Audits, is as under:

“Internal audit provides independent assurance on the effectiveness of internal controls and risk management processes to enhance governance and achieve organisational objectives”.

Brief explanation of the key terms used in Definition of Internal Audit

(i) Independence: Internal audit must be an independent function, as evidenced by the internal auditor’s position, organisational structure, and reporting.

In addition to giving assurance, the internal auditor may take on an advisory role to assist an organisation in meeting its goals, as long as this does not jeopardise the internal auditor’s independence.

(ii) Internal controls and risk management are necessary aspects of management and business operations. Internal auditors are responsible for assessing the design and operational effectiveness of internal controls and risk management processes (including reporting processes).

(iii) Governance is a system of interactions between the organisation and its numerous stakeholders that provides the framework for achieving the company’s goals. It entails adhering to internal policies and processes, as well as laws and regulations.

(iv) Organizational objectives combine the interests of all stakeholders and include the short and medium term goals that an organisation tries to achieve.

This definition of ‘Internal Audit’ serves as the basic foundation for all ICAI Standards on Internal Audit (SIAs). Internal audit operations must be carried out in accordance with the Definition of Internal Audit.

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