Internal Audit reporting structure

A strong internal audit function should report directly to the audit committee. Internal Audit may be administratively accountable to the CEO, but is functionally accountable and owes its loyalty to the Audit Committee, who recommend to the Board, CEO and CFO the appointment, evaluation, compensation (at least annually, including incentive structure) and retention of the Head of Internal Audit. The Audit Committee should also have a say in reassignment or replacement of senior staff, and review and approve the mandate, work plan, budget and resources for this function.

The audit committee should help the head of internal audit to function independently from management and to be objective in the reporting of factual findings to the committee. Any action taken regarding Internal Auditors work or status should be approved by the audit committee to avoid the internal audit staff becoming dependent on the management. The head of internal audit (including senior staff) should not engage in operational duties or non-internal audit transactions or oversight and should have direct access to the audit committee chair. The audit committee should also ensure that follow up of corrective action is taken by management in response to an internal audit report and matters raised are tracked, promptly resolved and reported to the audit committee.

Advertisements

About surenraj

“Views expressed are my own”
This entry was posted in Governance and tagged . Bookmark the permalink.

One Response to Internal Audit reporting structure

  1. Hi there, just wanted to tell you, I liked this post.
    It was helpful. Keep on posting!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s