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 Auditors barred from putting a value on companies they are auditing
 Standard on Internal Audit (SIA) 18, Related Parties
 Standard on Internal Audit (SIA) 17, Consideration of Laws and Regulations in an Internal Audit
 Standard on Internal Audit (SIA) 16, Using the Work of an Expert
 Standard on Internal Audit (SIA) 14, Internal Audit in an Information Technology Environment
 Standard on Internal Audit (SIA) 13, Enterprise Risk Management
 Standard on Internal Audit (SIA) 12, Internal Control Evaluation
 Standard on Internal Audit (SIA) 11, Consideration of Fraud in an Internal Audit
  Standard on Internal Audit (SIA) 9, Communication with Management
  Standard on Internal Audit (SIA) 8, Terms of Internal Audit Engagement
 Standard on Internal Audit (SIA) 7, Quality Assurance in Internal Audit
 Standard on Internal Audit (SIA) 6, Analytical Procedures
 Standard on Internal Audit (SIA) 5, Sampling
 Standard on Internal Audit (SIA) 4, Reporting
 

Standard on Internal Audit (SIA) 7, Quality Assurance in Internal Audit
November, 28th 2018
           STANDARD ON INTERNAL AUDIT (SIA) 7
          QUALITY ASSURANCE IN INTERNAL AUDIT*

Contents
                                                                             Paragraph(s)

Introduction ............................................................................... 1-2

Scope .......................................................................................... 3

Objective................................................................................. 4-10

Internal Quality Reviews ....................................................... 11-14

External Quality Review ........................................................ 15-17

Effective Date .............................................................................18


    The following is the text of the Standard on Internal Audit
    (SIA) 7, Quality Assurance in Internal Audit , issued by the
    Council of the Institute of Chartered Accountants of India.
    These Standards should be read in conjunction with the
    Preface to the Standards on Internal Audit, issued by the
    Institute.
    In terms of the decision of the Council of the Institute of
    Chartered Accountants of India taken at its 260th meeting
    held in June 2006, the following Standard on Internal Audit
    shall be recommendatory in nature in the initial period. The
    Standards shall become mandatory from such date as
    notified by the Council.




    Published in the October 2008 issue of The Chartered Accountant .
*
Standard on Internal Audit (SIA 7)


Introduction
1.       Paragraph 3.1 of the Preface to the Standards on Internal Audit ,
         describes the internal audit as follows:
         "Internal audit is an independent management function, which involves
         a continuous and critical appraisal of the functioning of an entity with a
         view to suggest improvements thereto and add value to and
         strengthen the overall governance mechanism of the entity, including
         the entity's strategic risk management and internal control system.
         Internal audit, therefore, provides assurance that there is transparency
         in reporting, as a part of good governance."
2.       Paragraphs 7 and 8 of the Standard on Internal Audit (SIA) 2, Basic
         Principles Governing Internal Audit , state as follows:
         "7. The internal auditor should either have or obtain such skills and
         competence, acquired through general education, technical
         knowledge obtained through study and formal courses, as are
         necessary for the purpose of discharging his responsibilities.
         8. The internal auditor also has a continuing responsibility to maintain
         professional knowledge and skills at a level required to ensure that the
         client or the employer receives the advantage of competent professional
         service based on the latest developments in the profession, the economy,
         the relevant industry and legislation."

Scope
3.       This Standard on Internal Audit shall apply whenever an internal audit is
         carried out, whether carried out by an in house internal audit department
         or by an external firm of professional accountants. For the purpose of this
         Standard, the term "firm" means a sole practitioner/ proprietor, partnership
         or any such entity of professional accountants as may be permitted by
         law1.







1   The Standard on Quality Control (SQC) 1, Quality Control for Firms that Perform Audits and
Reviews of Historical Financial Information, and Other Assurance and Related Services
Engagements issued by the Council of the Institute of Chartered Accountants of India applies to the
firms carrying out internal audit to the extent such internal audit activities fall under the scope of
audits and reviews of the historical financial information and other assurance and other related
services.
                                                  2
                                 Quality Assurance in Internal Audit

Objective
4.    The purpose of this Standard on Internal Audit (SIA) is to establish
      standards and provide guidance regarding quality assurance in internal
      audit.
5.    A system for assuring quality in internal audit should provide
      reasonable assurance that the internal auditors comply with
      professional Standards, regulatory and legal requirements, so that
      the reports issued by them are appropriate in the circumstances.
6.    In order to ensure compliance with the professional Standards,
      regulatory and legal requirements, and to achieve the desired
      objective of the internal audit, a person within the organization
      should be entrusted with the responsibility for the quality in the
      internal audit, whether done in ­ house or by an external agency.
7.    In the case of the in ­ house internal audit or a firm carrying out
      internal audit, the person entrusted with the responsibility for the
      quality in internal audit should ensure that the system of quality
      assurance include policies and procedures addressing each of the
      following elements:
     a)   Leadership responsibilities for quality in internal audit - The
          person entrusted with the responsibility for the quality in
          internal audit should take responsibility for the overall quality in
          internal audit.
     b)   Ethical requirements - The person entrusted with the
          responsibility for the quality in internal audit should establish
          policies and procedures designed to provide it with reasonable
          assurance that the personnel comply with relevant ethical
          requirements. If matters come to his attention that indicate that
          the members of the internal audit engagement team have not
          complied with relevant ethical requirements, he should, in
          consultation with the appropriate authority in the entity,
          determine the appropriate course of action.
     c)   Acceptance and continuance of client relationship and specific
          engagement, as may be applicable­ The person entrusted with
          the responsibility for the quality in internal audit should
          establish policies and procedures for the acceptances and
                                     3
Standard on Internal Audit (SIA 7)

          continuance of client relationships and specific engagements,
          designed to provide reasonable assurance that it will undertake
          or continue relationships and engagements.
     d)   Human resources - The person entrusted with the responsibility
          for the quality in internal audit should establish policies and
          procedures regarding assessment of the staff's capabilities and
          competence designed to provide it with reasonable assurance
          that there are sufficient personnel with the capabilities,
          competence, and commitment to ethical principles necessary to:
           Perform engagements in accordance with professional
           standards and regulatory and legal requirements; and
           Enable the firm or engagement partner to issue reports that
           are appropriate in the circumstances.
     e)   Engagement performance- The person entrusted with the
          responsibility for the quality in internal audit should establish
          policies and procedures designed to provide it with reasonable
          assurance that engagements are performed in accordance with
          the applicable professional Standards and regulatory and legal
          requirements and that the reports issued by the internal auditors
          are appropriate in the circumstances.
     f)   Monitoring - The person entrusted with the responsibility for the
          quality in internal audit should establish policies and
          procedures designed to provide reasonable assurance that the
          policies and procedures relating to the system of quality
          assurance are relevant, adequate, operating effectively and
          complied with in practice.
8.    In order to improve the functionalities of the organisation,
      transparency in reporting and good governance, the person
      entrusted with responsibility for the quality in internal audit, while
      establishing the quality assurance framework, should consider the
      following parameters of the internal audit activity:
            Terms of engagement and their adequacy.
            Professional standards and compliance therewith.


                                    4
                                  Quality Assurance in Internal Audit

            Internal audit goals and the extent to which they are being
            achieved.
            Recommendations for improving the quality of internal audit
            and the extent to which they are being implemented and their
            effectiveness.
            Skills and technology used in carrying out internal audit.
9.   The person entrusted with the responsibility for the quality in internal audit
     needs to ensure that the quality assurance framework is embedded in the
     internal audit. This can, for example, be achieved in the following manner:
            Developing an internal audit manual clearly defining the specific
            role and responsibilities, policies and procedures, documentation
            requirements, reporting lines and protocols, targets and training
            requirements for the staff, internal audit performance measures
            and the indicators.
            Ensuring that the internal audit staff at all levels is appropriately
            trained and adequately supervised and directed on all
            assignments.
            Identifying the customers of the internal audit activity.
            Establishing a formal process of feedback from the users of the
            internal audit services, such as the senior management
            executives, etc. Some of the attributes on which the feedback may
            be sought include quality, timeliness, value addition, efficiency,
            innovation, effective communication, audit team, time
            management. The responses received from the users of the
            internal audit services should also be shared with the
            appropriate levels of management and those charged with
            governance.
            Establishing appropriate performance criteria for measuring
            the performance of the internal audit function. In case the
            internal audit activity is performed by an external agency, the
            contract of the engagement should contain a clause for
            establishment of performance measurement criteria and
            periodic performance review. These performance


                                       5
Standard on Internal Audit (SIA 7)

             measurement       criteria       should   be   approved    by    the
             management.
             Identify and benchmark with industry/ peer group performance.
10.   The quality assurance framework established by the person
      entrusted with the responsibility for the quality in internal audit
      should, therefore, cover all the elements of the internal audit activity.
      For example,
             Development and implementation of the internal audit policies and
             procedures.
             Maintenance and monitoring of the budget for the internal audit
             activity.
             Maintenance and updations of the overall internal audit plan.
             Identification of the risk areas and the internal audit plan to
             address these risks.
             Acquisition and deployment of audit tools and use of technology to
             enhance the efficiency and effectiveness of the internal audit
             activity.
             Co-ordination with the external auditors.
             Staffing related aspects of internal audit ­ recruitment, training,
             etc.
             Planning and implementation of the training and professional
             development of the internal audit staff.
             Implementation of the performance metrics for the internal audit
             activity and periodic monitoring of the same.
             Review of the follow up actions taken on the findings of the internal
             audit activity.






Internal Quality Reviews
11.   The internal quality review framework should be designed with a
      view to provide reasonable assurance to that the internal audit is
      able to efficiently and effectively achieve its objectives of adding
      value and strengthening the overall governance mechanism of the

                                          6
                                  Quality Assurance in Internal Audit

      entity, including the entity's strategic risk management and internal
      control system.

Internal Quality Reviewer
12.   The internal quality review should be done by the person entrusted
      with the responsibility for the quality in internal audit and/ or other
      experienced member(s) of the internal audit function.
13.   The internal quality reviews should be undertaken on an ongoing
      basis. The person entrusted with the responsibility for the quality in
      internal audit should ensure that recommendations resulting from
      the quality reviews for the improvements in the internal audit activity
      are promptly implemented.

Communicating the Results of the Internal Quality Review
14.   The person entrusted with the responsibility for the quality in
      internal audit should also ensure that the results of the internal
      quality reviews are also communicated to the appropriate levels of
      management and those charged with governance on a timely basis
      along with the proposed plan of action to address issues and
      concerns raised in the review report.

External Quality Review
15.   External quality review is a critical factor in ensuring and enhancing the
      quality of internal audit. The frequency of the external quality review
      should be based on a consideration of the factors such as the
      maturity level of the internal audit activity in the entity, results of the
      earlier internal audit quality reviews, feedbacks as to the usefulness
      of the internal audit activity from the customers of the internal audit,
      costs vis a vis perceived benefits of the frequent external reviews.
      The frequency should not in any case be less than once in three
      years.

External Quality Reviewer
16.   The external quality review should be done by a professionally
      qualified person having an in depth knowledge and experience of,
      inter alia, the professional Standards applicable to the internal

                                       7
Standard on Internal Audit (SIA 7)

      auditors, the processes and procedures involved in the internal
      audit generally and those peculiar to the industry in which the entity
      is operating, etc. The external quality reviewer should be appointed
      in consultation with the person entrusted with the responsibility for
      the quality in internal audit, senior management and those charged
      with governance.

Communicating Results of the External Quality Review
17.   The external quality reviewer should discuss his findings with the
      person entrusted with the responsibility for the quality in internal
      audit. His final report should contain his opinion on all the
      parameters of the internal audit activity, as discussed in paragraph
      10, and should be submitted to the person entrusted with the
      responsibility for the quality in internal audit and copies thereof be
      also sent to those charged with governance. The person entrusted
      with the responsibility for the quality in internal audit should, also
      submit to those charged with governance, a plan of action to
      address the issues and concerns raised by the external quality
      reviewers in his report.

Effective Date
18.   This SIA is effective for all quality assessments/ reviews of internal audit
      undertaken on or after .................................. Earlier application of the
      SIA is encouraged.




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