Internal Audit and the Relationship with Senior Management

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Internal Audit and the Relationship with Senior Management

Summary: The case study “Internal Audit Reporting Relationships: Serving Two Masters” was a part of a series of research projects being developed by the Institute of Internal Auditors to determine the various relationships, specifically reporting relationships between the internal auditor and those charged with governance. To obtain research about the various types of reporting relationships, independence, conflicts that arise from these relationships and what services are to be provided in the internal audit practice, a survey was conducted where approximately 1600 Chief Audit Executives responded. Results showed that internal audit practice has three main customers who benefit from their services which include senior management (i.e. CEO and CFO), audit committee and operational management of which all three have a different idea of what is of importance in relation to the internal audit practice. The case study addressed many questions of which I have answered below.

Question 1: What is the correct relationship of internal audit to senior management? To correctly determine the relationship of the internal audit to senior management, one must look at the definition of the internal audit practice. Internal auditing is a means for improving a company’s effectiveness and efficiency by conducting reviews of operations and providing recommendations based on analyses and evaluations of data and business processes. With commitment to integrity and objectivity, internal auditing provides value to those charged with governance (i.e. audit committee and board of directors) and senior management as an unbiased source of independent advice. Internal auditors serve three main groups in a company, whom include: senior management, operational management, and audit committee/the board of directors. These three group of individuals although working for the same organization have different views on what...
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