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Revised Public Sector Internal Audit Standards April 2017

Revised Public Sector Internal Audit Standards (PSIAS) came into force on 1 April 2017. The PSIAS are based on the mandatory elements of the International Professional Practices Framework (IPPF). The IPPF is issued by the Institute of Internal Auditors.

The key components to the standards are:

  • definition of internal auditing
  • core principles for the professional practice of internal auditing
  • code of ethics
  • international standards for the professional practice of internal auditing (which comprise statements, interpretations and a glossary)
  • plus the mission of internal auditing.

 The PSIAS have been adopted by the following relevant bodies:

  • HM Treasury
  • Department of Health
  • the Scottish Government
  • the Welsh Government
  • the Department of Finance (NI).

The standards apply to all providers of internal audit services to the NHS.

The standards have been revised to incorporate new and revised international standards and consequent amendments to the additional public sector requirements and interpretations.

Key changes to the standards

New standards

Two new standards have been included as follows:

Standard: Where the chief audit executive has or is expected to have roles and/or responsibilities that fall outside of internal auditing, safeguards must be in place to limit impairments to independence or objectivity.

Rationale: This aim is to recognise that Heads of Audit are sometimes asked to take on risk management, compliance, or other roles beyond internal auditing.

Standard: The internal audit activity may provide assurance services where it had previously performed consulting services, provided the nature of the consulting did not impair objectivity and provided individual objectivity is managed when assigning resources to the engagement.

Rationale: This recognises the need to manage objectivity in a situation where audit performs an assurance engagement after previously consulting in the area.

Alignment of standards to the Core Principles

There have been some modifications to the standards to ensure they align to the core principles of internal audit. The primary changes relate to two core principles that internal audit:

  • Aligns with the strategies, objectives, and risks of the organisation
  • Is insightful, proactive, and future-focused.

Updates to existing Standards

There have been some wording changes to the existing standards with the most significant changes as follows:

Interference with audit activity

In addition to the original statement that

‘The internal audit activity must be free from interference in determining the scope of internal auditing, performing work and communicating results’

the standards also now require that

‘The chief audit executive must disclose such interference to the board and discuss the implications’.

Reporting on the Quality Assurance and Improvement Programme

In addition to the original statement that

‘The chief audit executive must communicate the results of the quality assurance and improvement programme to senior management and the board’

additional requirements now include that the

‘Disclosure should include: The scope and frequency of both the internal and external assessments. The qualifications and independence of the assessor(s) or assessment team, including potential conflicts of interest. Conclusions of assessors. Corrective action plans.

Disclosure of Non-conformance

In addition to the original statement that

‘When non-conformance with the Definition of Internal Auditing, the Code of Ethics or the Standards impacts the overall scope or operation of the internal audit activity, the chief audit executive must disclose the non-conformance and the impact to senior management and the board’

there is also now a public sector requirement that

‘Such non-conformances must be highlighted by the chief audit executive to be considered for inclusion in the governance statement’.

Response to the Revised Standards by Audit Yorkshire

Audit Yorkshire (AY) adopts and reflects the PSIAS through the Internal Audit Charter and supporting documents contained in the Quality Manual.

To ensure our approach adequately reflects the revised standards we have:

  1. Reviewed the Internal Audit Charter for approval by individual Audit Committees
  2. Reviewed the Advisory Services Protocol that supports the charter
  3. Commenced a full review of our Quality Manual. This also aligns with the merger workstream underway to consolidate audit procedures and practices.