Question 2 ( 10 marks)

You were recently hired by the President of a private company, Eastern Forest Corporation (EFC), a private company to be the Audit Director. You hired an audit manager and some audit staff. At their next meeting the Audit Committee who reports to the Board would like to review the internal audit charter. Accordingly, you have asked the Internal Audit Manager on your team to draft an internal audit charter You are reviewing the document and have concerns. Below are excerpts from the draft charter:

EXCERPTS FROM INTERNAL AUDIT CHARTER -EFC

The mission of Internal Audit ("IA") is to increase profitability for EFC. IA assists EFC with accomplishing its objectives by evaluating and improve the effectiveness of risk management, control, and governance processes.

IA staff have a responsibility to:

• Maintain sufficient knowledge, skills and experience subject to training budget availability as determined by the President;
• Annually prepare a 3 year audit plan for review and approval by the President and the Audit Committee
• Issue an audit report to management at the conclusion of each audit in order to communicate the audit findings;
• Prepare and present quarterly reports to the audit committee summarizing the status and the results of audit activities.

Management is responsible for following-up on outstanding management action plans to ensure significant risks and major deficiencies identified by internal audit are effectively addressed and remediated by management within an acceptable timeframe.

REPORTING

A written report will be prepared and issued by the Audit Director following the conclusion of each audit and will be distributed to both management and the audit committee.

INDEPENDENCE AND AUTHORITY

To provide for the independence of the Internal Audit Department, the Audit Director will report functionally to the President and administratively to the Audit Committee. The Audit Director or someone he/she designates in their absence will attend every Audit Committee.

To remain independent, Internal Auditors are now allowed to accept any gifts unless the gift is clearly insignificant.

The Internal Audit Department will replace staff as required the company during staff vacations or other times when the company is short of staff.

The Internal Audit Department is authorized to have unrestricted access to all company activities, records, property and personnel.

Approved by: _________ Title: President Date: October 2021

Required:

Discuss five (5) issues that are present within the charter and recommend changes to the issues noted in the charter. Use the following format:

Discussion of Issue (1 mark)	Recommendation for Improvement (1 mark)