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  3. 4. in exhibit 3-4 the internal audit function is i

4. In exhibit 3-4 the internal audit function is included in the assurance box. In light...

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Accounting

4. In exhibit 3-4 the internal audit function is included in theassurance box. In light of this assurance role, discuss the prosand cons of the chief audit executive (CAE)reporting to the boardof directors (or one of its committees) versus the chief financialofficer Relate your answer to the concepts described in Standard1100: Independence and Objectivity

6. The General Auditor’s Office (CAO) of ABC jurisdiction issueda report on the XYZ Electric Corporative a large member-ownedutility. This report reviewed the work of MNO Consulting MNO foundnumerous internal control weakness. The GAO concurred with MNO’sconclusion and recommendations regarding the overall lack ofeffective internal controls. In particular, the GAO went on therecommended that the ABC   jurisdiction’slegislature should require by law that each cooperative;

  • Create a board of directors (board) and maintain a separateaudit committee.
  • Employ an internal auditor who reports to the board. A reporterfor the local newspaper has a couple of questions for you.
  1. Typically, what is the governing board’s responsibility forinternal controls?
  2. Why would the GAO want each cooperative board to employ aninternal audit?

Answer & Explanation Solved by verified expert
4.1 Ratings (473 Votes)
Chief Audit Executive Reported to following authorities 1 Chief Financial OfficerCFO 2Audit Committee 3 Board of Directors or one of them 4 Chief Executive Officer 5Other Governing Authority Pros and Cons reported to Board of Directors and one of them Pros 1 If Chief Audit Executive Report to board of directors directly is more advantageous for his independence and his internal audit accessibility 2 Chief Audit ExecutiveCAE works under management Whole control on audit is under management 3 If there is fall in companys performance then it is necessary to report to management regarding internal auditing So management can take better decisions related with improvement 4 If there is a conflict between Chief Audit Executive and Chief Financial Officer regarding any fraud then CAE can reported to Board of Directors directly This is beneficial for companys actual performance determination Cons 1 If Chief Audit ExecutiveCAE always reported to Board of Directors rather than Chief Financial Officer or his Auditing Committee then management can mistrust internal auditor because he is not a member of management or Board of Directors 2 Sometimes management take decisions on behalf of CAE reports but there may be a fall in performance of company Pros and Cons when Chief Audit Executive reported to Chief Financial Officer    See Answer
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