VISION OF THE INTERNAL AUDIT DIVISION

The Internal Audit Division is the division in the Company that  is envisioned as the professional internal auditor of the Company that is recognized by stakeholders, internal circle of the Company and outside parties. This Division of the Company can also increase the value of the Company, and assist the establishment of Good Corporate Governance  in the Company.

MISSION OF THE INTERNAL AUDIT DIVISION

Mission of IAD is to fulfill the vision of the Internal Audit, whose mission has already been defined in accordance with the overall aim of the organization. In doing their mission, the internal auditor is expected to contribute to achieve the aims of the organization. The mission of IAD is to perform the function of internal audit through assurance (testing and judgment and the provision of consultancy services). The assurance function of IAD has been implemented by the activities such as operational audit, compliance audit, financial audit, system information audit , investigation audit, desk audit, review for a special purpose audit, and others type of the assurance, which are all generally known as the audit activities. The implementation of providing consultancy services is done transparently so it won’t influence the independence and the objectivity of IAD in doing assurance of the objects in consultation. In line with the dynamics of Company, this mission will be perfected by validating all documents stated in the vision, mission, and purpose of the Company.

INTERNAL AUDIT DIVISION TARGET

The assurance and the consultation function of IAD are done by targeting and identifying the Company’s risk,  the availability of internal control that is sufficient and work efficiently and effectively, and the realization of Good Corporate Governance in the Company. 

THE AUTHORITY OF THE INTERNAL AUDIT DIVISION

The delegated authority of the IAD, which is included in Internal Audit Charter shows the support provided by the Company’s management in empowering the IAD. The delegated authority showes the rights of the IAD given by the Company .

IAD have the authority :

1. To obtain information in timely manner from all employees of the Company.
   This authority or right is the most important authority given by the Company to the IAD. The IAD is entitled to acquire or have the authority to unlimited access to all information, explanations, notes, documents, employees, building, facilities and other assets in a short time (sufficient time for example is in 24 hours) from all employees of the Company. With this authority, the IAD is entitled to see all documents and records, ask for information from all employees, and access all the buildings, facilities, and assets of the Company. For that, each employee of the Company is obliged to provide information required by the IAD in a short time allow the IAD to work effectively. The provision to this authority over “access” has been given as it is the best practice standard by almost all companies who have an Internal Audit Charter. Because of being a best practice standard the Charter that does not provide this authority can create doubt by an external party of the commitment of the Company in supporting the effectiveness of internal audit function and the control processes in the Company.
2. To allocate the audit resources, determine focus, the scope and schedule of audit, and to implement the necessary technic to obtain the audit result. If necessary, the IAD has the authority to obtain the suggestion and advice from a third party professional (expert).
   The heavy duties and obligations should be accompanied by sufficient authority. For that, the IAD must be supported by sufficient resources and be given freedom to determine the allocation of resources, focus and audit object, time and schedule and to implement audit technics that are deemed necessary. Furthermore, the IAD will have the chance to get services assistance from an expert when deemed necessary to perform the audit assignment. The service assistance that is usually required by the auditor is the consultation for technical operational matters or legal matters.
3. To consult and provide a report to the President Director and to coordinate with the Commissioner through the audit committee.
   The effectiveness of internal audit activities is very dependent on the utilization and the implementation of audit results. For that reason, the head of the IAD needs to get the chance to be able to consult with the board of directors, audit committee, and the board of commissioners, either in the forum of the meeting or in any other times deemed necessary. A chance to regularly meet with the board of directors or the board of commissioners has a big influence in the independency of internal audit. Access for the head of the IAD to the board of directors and the board of commissioners supports the implementation of Good Corporate Governance.

THE OBLIGATION OF THE INTERNAL AUDIT DIVISION

This section sets the expectation of the role of the IAD in assisting the Company’s management. The formulation of this role usually concerns the management system control, obedience , disclosure of fraud, efficiency and effectiveness, risk management, and Good Corporate Governance. This section states clearly the role of the auditors and management relating to a system and the process mentioned above .  In general, management has an obligation to build and implement, while the IAD has the role reviewing several process and system.

In some company, the explanation of auditor’s obligation may be further elaborated by stating the obligation to prepare on audit planning to conduct the job in accordance with standard professional internal audit.

The IAD is obliged to :

1. Help the board of directors and commissioners fulfill the responsibility of the company’s management and to monitor the sufficiency and effectiveness of the Company’s internal control system.
   An obligation to develop internal control system in order to achieve the aims and targets of the Company is the management responsibility. Focus of the control system’s monitoring is in the assessment of business activities of the Company as it leads to the achievement of the aims and targets of the Company effectively, efficiently, and economical. In this context, the IAD is obliged to create more value by continouly finding the opportunity to increase the savings, efficiency, and effectiveness. In the sphere of business that is rapidly changing, one of the obligation of the auditor is to review the risk management system and direct attention of the management on changes in important areas of the business and the risks that can be prevented within the aims of the organization.
2. Help the board of directors and commissioners in improving good corporate governance in the company, especially by encouraging the effectiveness of good corporate governance mechanisms, and the effectiveness of internal control’s process, risk management, the implementation of business ethics, and measuring the organization’s performance.
3. Provide an assessment and recommendation to allow the activities of the Company to achievem the aims and the targets effectively, efficiently, and economicly.
4. Advice to management about changes on the area of business, business risk that appears, and other things that affect the result and performance of the Company.
5. Evaluate the sufficiency and the effectiveness of internal control system. Operational management is required to develop internal control system in order to achieve the aims and targets of the Company.

THE SCOPE OF WORK OF THE INTERNAL AUDIT DIVISION

The scope of the IAD specifies which field or focus is included in the scope of audit. In line with the scope of management control system modern, the scope work of the IAD includes :

1. Convinced that internal control system is already sufficient, are operating efficiently, economical, and functioning effectively in achieving the intended aims and targets.
2. Evaluate observance of law and regulations, as well as policies and procedures of the Company.
3. Evaluate the reliability and integrity of financial and operational information.
4. Assess sufficiency of facilities to maintain and protect the assets of the Company .
5. Implement special assignment that is relevant within the scope of work that is mentioned above, such as investigation and disclosure over deviation, fraud, and waste.
6. Prepared a report an assurance and recommendations for improvement.

RESPONSIBILITY (ACCOUNTIBILITY)

The IAD is obliged to be fully responsible on compliance of its obligations especially to the board of directors and board of commissioners (audit committee).

The responsibility of the IAD to the President Director are as follows :

1. pass judgment on sufficiency and the effectiveness of the Company’s management process in controling its activities and risk management.
2. report important matters relating to the process of internal control, including reporting the possibility of performing the improvements on the process.
3. provide information on the development (progress) and the implementation of annual audit plan and sufficiency of audit resources.
4. coordinate with control institution and other government bodies, such as Audit Committee and External Audit.

THE STANDARD OF JOBS IMPLEMENTATION

The Internal Audit Charter is usually requires that auditor in implementating their duties, shall referr to the Standards of Audit Profession and the Code of Conduct of the Company. The Standard is in accordance with the Code of Conduct and International Standards of Auditing from THA Institute of Internal Auditor Inc., Florida, USA (Standard IIA) that has been ratified by a Consortium of Indonesia Professional Internal Auditors.

To facilitate the fulfillment set out in the Standard IIA, the IAD of the Company publishes the internal standard mentioned in the summary mentioned above, the implementation of the audit in the Company will be in accordance with the standard developed internally by the IAD from the Company. This standard is a modification of Standard IIA. In terms of the problems faced by IAD that have not been managed in the IAD standard of the Company, the auditors of the Company will follow the Standard IIA and Code of Conduct.

THE SUPPLEMENT OF THE INTERNAL AUDIT CHARTERED

The supplement of the Internal Audit Charter contains an explanation on various aspects of the Internal Audit Charter, such as the significance, benefits , and development strategy of the Internal Audit Charter. The purposes of this supplement is to help the internal auditors better understand the function and benefit of the Internal Audit Charter.

THE SIGNIFICANCE OF THE INTERNAL AUDIT CHARTER

The Internal Audit Charter serves as a reference for the IAD. The Internal Audit Charter is a document that provides a formal reason on the purpose of existence the internal audit function. The Internal Audit Charter is also assist to explain about the position of internal audit function in the organization. Internal Audit Charter may also be used as a tool for audit market services. As a reference, Internal Audit Charter can also be used to maintain audit works in the event there is a disagreement with audit results.

THE BENEFIT OF  THE INTERNAL AUDIT CHARTER

The Internal Audit Charter is used as :

1. Formal recognition of internal audit function;
2. A documenting of scope, obligation, authority, and professionalism of the internal audit function.
3. A comparison with professional standard to evaluate the sufficiency of intenal audit work.
4. A base for external accountant of the Company in evaluating the independence and work of the internal audit.
5. May be documents of marketing to improve cooperation with other units in organization.

FORMALIZATION FUNCTION OF THE INTERNAL AUDIT DIVISION

The Charter is a document that formally establishs the Internal Audit Division (IAD) function. This document also formally states the aims and mission of the IAD. The Charter may be viewed as a contract between IAD with the board of directors and the commissioners (audit committee), who provides the IAD powers to began audit work in the Company. The Internal Audit Charter set the right of the IAD Head and all auditor staff to check every part in the organization, and scrutinize the Company’s assets and documents.

DOCUMENTATION ON SCOPE, OBLIGATION AND THE AUTHORITY OF THE INTERNAL AUDIT DIVISION

The Internal Audit Charter is a written document that provides “approval” between IAD and senior management  over the scope, obligation, and authority of the IAD. If it is not made into a formal document (for example : only orally) this kind of “approval” may have different interpretations, diverted interpretation over time, and may miss documentation. The Internal Audit Charter is a permanent documents that states the “approval”.

THE BASIS TO COMPARISON TO THE PROFESSIONAL STANDARD

Internal audit may use the professional standard of internal audit (Standard IIA) as a basis to measure if the implementation of its work is already sufficient or not. By working in accordance with the  standard, the auditors may defend themselves from malpractice accusation or inadequate work. The Internal Audit Charter may be compared with the Standard IIA to ascertain whether it has been made properly, so that there are guarantee that the audit was in accordance to the Internal Audit Charter and adequate.

THE BASIS TO THE IMPLEMENTATION OF THE POLICY AND THE PROCEDURE OF THE INTERNAL AUDIT DIVISION

In its development, the head of IAD will release various policies, procedures, and instructions that is applied within the IAD corps. A good Internal Audit Charter may be able to ensure that the various policies and procedures is consistent one another, and in accordance with the mission and the purpose of the internal audit function.

THE INFORMATION FOR RELATED PARTIES

A lot of auditees do not have a vision about the work that done by the internal audit. The Auditee often does not knowing the difference between the internal auditor with others auditors who audits the company, for example a public accountant. The Internal Audit Charter will remove this confusion by communicating the overall mission and purpose of the IAD clearly. The Parties involved in the process of audit, or relating to the auditors, may be given the Internal Audit Charter as a basis for explaination on the authority, scope, obligation, and characteristic of the work done by the IAD.

BASIS OF EVALUATION BY THE EXTERNAL AUDITOR

In implementing the duties of the external auditor there is a need to evaluate the activities that carried out by internal audit. A good internal audit can reduce the amount of audit fees on a financial report done by a public accountant (external audit) . The Internal Audit Charter will become the basis for external audit in judging the independency and the effectiveness of IAD’s function.

THE BASIS TO MARKET THE FUNCTION OF THE INTERNAL AUDIT DIVISION

The audit, in participative or cooperative, has been proven to be more effective than a sudden audit without notification. Publication of the Internal Audit Charter may improve the understanding of the auditee of the function of audit and encourage the participation of the auditee.

RESPONSIBILITY ON PREPARATION OF THE CHARTER

The Development of the Internal Audit Charter is the responsibility of the head of the IAD. However, the development of the Internal Audit Charter is done preferably with consultation by top management. The step of consultation with management give the opportunity for the IAD to convey memorandumS to top management and other related parties to inform that the IAD is developing and formulating its role based on the provision of the Internal Audit Charter. In addition to notice, this kind of memorandum may be used to ask for inputs, support , and approval of the Internal Audit Charter.