Diana Melville FCPFA, CIPFA Governance Advisor
New internal audit standards will be implemented from 1 April 2025 and will replace the Public Sector Internal Audit Standards (PSIAS).
The Global Internal Audit Standards in the UK Public Sector – maintain a focus on well-established internal audit practices, alongside an emphasis on the strategic value of internal audit.
CIPFA has collaborated with other internal audit standard setters to consider how they might be best applied. In 2024, CIPFA published the Application Note, Global Internal Audit Standards, to address aspects of the new standards that are not easy to apply in the UK because of legislation and other factors.
To support authorities in maintaining their internal audit arrangements in line with the global standards, CIPFA developed the Code of Practice on the Governance of Internal Audit in UK Local Government. The Code focuses on the assumptions around the governance of internal audit found in the Institute of Internal Auditors (IIA) Global Standards, replacing them with responsibilities appropriate for the sector.
To be effective in their role, it is vital that audit committees and senior management in local government organisations provide adequate support and oversight. Statutory regulations place a clear mandate on authorities to maintain effective internal audit processes in accordance with professional standards.
The Code should be used as a route map for those in governance roles to organise their internal audit function. It builds on existing CIPFA guidance on audit committees and our earlier Statement on the Role of the Head of Internal Audit.
There are also changes that need to be made to the charter and audit plans for 2025/26. We understand this is a difficult transition, so we don’t expect internal audit teams to have everything in place straight away. But it is important that from 1 April the new standards are used to guide audit planning, engagements and reports. Then, over the course of the audit year, internal audit teams will build up their evidence of conformance.
At the same time, authorities should consider whether changes are needed in the governance of internal audit to meet the CIPFA Code. Although it builds on existing CIPFA recommended practice, there may be areas where further work is needed, such as supporting audit committees. When evaluating your audit committee, the Code must be used and development planned for 2025/26.
We know that resourcing is an issue of concern. Retention and recruitment difficulties and the ongoing pressure of resources are worrying and make sustainability more challenging. Resourcing is a crucial aspect of the CIPFA Code and all those with a responsibility in internal audit must work strategically to ensure that internal audit can fulfil its purpose. The Local Government Association (LGA) finance workforce action plan highlighted concerns around internal audit vacancies and action needed across the sector.
Looking ahead, implementation of the Global Internal Audit Standards in the UK Public Sector together with the Code of Practice will require communication and collaboration. Particularly between the head of internal audit, senior management and the audit committee. At a time when robust internal controls and sound management of risk are crucial, we simply cannot afford to be without effective internal audit.