Due to the increased operational responsibility of the CEO the chief audit executive (CAE) of an organization currently reports to the chief financial officer (CFO) What is the likely impact of such a situation?
A.
There may be limitation in the scope of engagements that can be undertaken
B.
The CFO could provide expert advice when auditing areas under his purview
C.
The internal audit activity is adequately positioned when the CAE reports to a member of executive management
D.
The expertise of finance staff can be called upon during an audit of finance-related areas
When the Chief Audit Executive (CAE) reports to the Chief Financial Officer (CFO), there is a potential risk of impairing the independence and objectivity of the internal audit function. This reporting relationship might limit the scope of audit engagements, especially in areas that could affect the CFO, such as financial reporting or other areas directly under the CFO's control. The CAE should ideally report functionally to the board or audit committee to maintain independence, as suggested by The IIA standards.
IIA Standard 1110: "Organizational Independence"
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