Internal Audit Charter Template Iia

INTERNAL AUDIT CHARTER

1. DOCUMENT PREAMBLE & RECITALS

This Internal Audit Charter (the "Charter") is entered into as of [Effective Date] (the "Effective Date") by and between [Company Name], a corporation organized and existing under the laws of [Jurisdiction] (the "Company"), and the Internal Audit Department (the "Department"), as overseen by the Audit Committee of the Board of Directors (the "Audit Committee").

WHEREAS, the Company recognizes the necessity of maintaining a professional internal audit function to provide independent, objective assurance and consulting services designed to add value and improve the Company’s operations;

WHEREAS, the Company intends for this Charter to define the purpose, authority, and responsibility of the internal audit activity in accordance with the International Professional Practices Framework (IPPF) of the Institute of Internal Auditors (IIA);

NOW, THEREFORE, the parties hereby agree to the terms set forth in this Charter.

2. OPERATIONAL DEFINITIONS

1. "Audit Activity" refers to the independent, objective assurance and consulting activity designed to add value and improve the Company’s operations.
2. "Chief Audit Executive" (CAE) refers to the person in a senior position responsible for effectively managing the internal audit activity in accordance with the internal audit charter and the Definition of Internal Auditing, the Code of Ethics, and the Standards.
3. "Board" refers to the Board of Directors of the Company.
4. "Audit Committee" refers to the subcommittee of the Board tasked with oversight of financial reporting, risk management, and the internal audit function.
5. "Independence" refers to the freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner.
6. "Internal Audit Standards" refers to the International Professional Practices Framework (IPPF) promulgated by the Institute of Internal Auditors (IIA).

3. SUBSTANTIVE TERMS & OBLIGATIONS

1. Purpose and Mission: The Internal Audit activity shall provide independent, objective assurance and consulting services to evaluate and improve the effectiveness of risk management, control, and governance processes.
2. Authority: The CAE shall have full, free, and unrestricted access to any and all of the Company’s records, physical properties, and personnel relevant to any function under review.
3. Independence and Objectivity: The internal audit staff shall have no direct operational responsibility or authority over any of the activities audited. The CAE shall report functionally to the Audit Committee and administratively to the [CEO/President].
4. Scope of Work: The scope of internal audit encompasses the examination and evaluation of the adequacy and effectiveness of the Company’s governance, risk management, and internal control processes.
5. Performance Metrics: The Department shall be evaluated based on the successful execution of the approved Annual Audit Plan, the quality of audit reports, and the timely implementation of management action plans.
6. Reporting: The CAE shall submit, at minimum, quarterly reports to the Audit Committee detailing audit findings, the status of the Audit Plan, and significant risk exposures.

4. DEFAULT, TERMINATION, AND REMEDIES

1. Breach: A material breach occurs if the Company fails to provide the CAE with access to information or personnel necessary to fulfill the Audit Plan, or if the Audit Committee fails to provide the oversight mandated herein.
2. Notice and Cure: The non-breaching party shall provide written notice of a breach. The breaching party shall have thirty (30) business days from the receipt of such notice to cure the breach.
3. Termination: If the breach remains uncured after the 30-day period, the CAE may report the obstruction directly to the full Board or regulatory authorities as deemed necessary under the Code of Ethics.
4. Remedies: In the event of an uncured material breach, the Audit Committee maintains the authority to initiate an independent investigation or take disciplinary action against relevant management, up to and including termination of employment.

5. BOILERPLATE LEGAL PROVISIONS

1. Severability: If any provision of this Charter is held to be invalid or unenforceable, such provision shall be severed and the remaining provisions shall continue in full force and effect.
2. Entire Agreement: This Charter constitutes the entire agreement between the parties regarding the internal audit function and supersedes all prior agreements, oral or written.
3. Force Majeure: Neither party shall be liable for failure to perform duties due to causes beyond their reasonable control, including but not limited to acts of God, war, or government regulation.
4. Governing Law: This Charter shall be governed by and construed in accordance with the laws of [Jurisdiction].
5. Dispute Resolution: Any disputes arising out of or relating to this Charter that cannot be resolved through good-faith negotiation shall be submitted to binding arbitration in [City, State] under the rules of the American Arbitration Association.

6. FORMAL EXECUTION BLOCK

IN WITNESS WHEREOF, the parties have caused this Charter to be executed by their duly authorized representatives as of the Effective Date.

FOR THE COMPANY:

Signature: __________________________ Name: [Name of Authorized Officer] Title: [Title] Date: [Date]

FOR THE AUDIT COMMITTEE:

Signature: __________________________ Name: [Name of Audit Committee Chair] Title: Chair, Audit Committee Date: [Date]

FOR THE INTERNAL AUDIT DEPARTMENT:

Signature: __________________________ Name: [Name of CAE] Title: Chief Audit Executive Date: [Date]