Topic 1: Continue

Nature of engagements for internal auditing can be primarily classifies into assurance or consulting. Assurance and consulting are not mutually exclusive, so an audit activity can have both assurance and consultative components.

Internal auditors may conduct consulting services as part of their normal or routine activities or in response to management requests. The following are examples of consulting categories:

• Formal consulting engagements - planned and subject to written agreement
• Informal consulting engagements - routine activities such as participation on standing committees 
• Special consulting engagements - participation on a merger or acquisition team
• Emergency consulting engagements - participation on a team established for recovery or maintenance operation. 

In all situations, a consulting engagement should not be conducted in an attempt to circumvent assurance engagement requirement.

Key documents to communicate the purpose, authority and responsibility of the internal audit activity to engagement clients includes the followings:

• Internal audit charter
• Function and responsibility statement (F&R)
• Statement of policy - This policy identifies the different missions of the audit activity and assists management and the board in the effective discharge of their responsibility.
• Audit manual - Includes written policies and procedures intended to provide guidance to the audit staff as they perform their duties.
• Staff job descriptions

Thorough understanding on the purpose, authority and responsibility of the internal audit activity:

• Purpose - Provide an independent objective assurance and consulting activity
• Authority - Provide appropriate unfettered access to records, personnel and physical properties
• Responsibility - Document the objectives and scope of the engagement as well as the methodology to be used.