Primary Related Standard
1110 – Organizational Independence
The chief audit executive must report to a level within the organization that allows the internal
audit activity to fulfill its responsibilities. The chief audit executive must confirm to the board, at
least annually, the organizational independence of the internal audit activity.
1. Support from senior management and the board assists the internal audit activity in gaining
the cooperation of engagement clients and performing their work free from interference.
2. The chief audit executive (CAE), reporting functionally to the board and administratively to
the organization’s chief executive officer, facilitates organizational independence. At a
minimum the CAE needs to report to an individual in the organization with sufficient authority
to promote independence and to ensure broad audit coverage, adequate consideration of
engagement communications, and appropriate action on engagement recommendations.
3. Functional reporting to the board typically involves the board:
• Approving the internal audit activity’s overall charter.
• Approving the internal audit risk assessment and related audit plan.
• Receiving communications from the CAE on the results of the internal audit activities or
other matters that the CAE determines are necessary, including private meetings with
the CAE without management present, as well as annual confirmation of the internal
audit activity’s organizational independence.
• Approving all decisions regarding the performance evaluation, appointment, or removal
of the CAE.
• Approving the annual compensation and salary adjustment of the CAE.
• Making appropriate inquiries of management and the CAE to determine whether there is
audit scope or budgetary limitations that impede the ability of the internal audit activity to
execute its responsibilities.
4. Administrative reporting is the reporting relationship within the organization’s management
structure that facilitates the day-to-day operations of the internal audit activity.
Administrative reporting typically includes:
• Budgeting and management accounting.
• Human resource administration, including personnel evaluations and compensation.
• Internal communications and information flows.
• Administration of the internal audit activity’s policies and procedures.
1110 – Organizational Independence
The chief audit executive must report to a level within the organization that allows the internal
audit activity to fulfill its responsibilities. The chief audit executive must confirm to the board, at
least annually, the organizational independence of the internal audit activity.
1. Support from senior management and the board assists the internal audit activity in gaining
the cooperation of engagement clients and performing their work free from interference.
2. The chief audit executive (CAE), reporting functionally to the board and administratively to
the organization’s chief executive officer, facilitates organizational independence. At a
minimum the CAE needs to report to an individual in the organization with sufficient authority
to promote independence and to ensure broad audit coverage, adequate consideration of
engagement communications, and appropriate action on engagement recommendations.
3. Functional reporting to the board typically involves the board:
• Approving the internal audit activity’s overall charter.
• Approving the internal audit risk assessment and related audit plan.
• Receiving communications from the CAE on the results of the internal audit activities or
other matters that the CAE determines are necessary, including private meetings with
the CAE without management present, as well as annual confirmation of the internal
audit activity’s organizational independence.
• Approving all decisions regarding the performance evaluation, appointment, or removal
of the CAE.
• Approving the annual compensation and salary adjustment of the CAE.
• Making appropriate inquiries of management and the CAE to determine whether there is
audit scope or budgetary limitations that impede the ability of the internal audit activity to
execute its responsibilities.
4. Administrative reporting is the reporting relationship within the organization’s management
structure that facilitates the day-to-day operations of the internal audit activity.
Administrative reporting typically includes:
• Budgeting and management accounting.
• Human resource administration, including personnel evaluations and compensation.
• Internal communications and information flows.
• Administration of the internal audit activity’s policies and procedures.
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