The OECD says that it is best practice among corporations wishing to demonstrate that risk oversight is in place over such systems to establish an internal audit function that reports directly to an independent audit committee, in a paper – G20/OECD Principles of Corporate Governance – presented to G20 Finance Ministers and Central Bank Governors in September 2015.
“It is considered good practice for the internal auditors to report to an independent audit committee of the board or an equivalent body which is also responsible for managing the relationship with the external auditor, thereby allowing a co-ordinated response by the board,” says the document.
The paper also says that internal audit is ideally placed to oversee an organisation’s internal controls, providing it has direct access to the board. Internal auditors should also provide non-executive board members with timely information on risk to help their decision making.
“We welcome the OECD’s recognition of the key role internal auditors should play in the corporate governance structure of organisations,” Thijs Smit, ECIIA President, says. “An independent internal audit function that reports directly to the board can provide valuable assurance to the business that its controls over its key risks are robust and up-to-date.”
The G20/OECD’s principles are intended to help policy makers evaluate and improve the legal, regulatory, and institutional framework for corporate governance, with a view to support economic efficiency, sustainable growth and financial stability, the report says.
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