Chief Audit Executive
Encyclopedia
The Chief Audit Executive (CAE), Director of Audit, Director of Internal Audit, Auditor General
, or Controller
General is a high level independent corporate executive with overall responsibility for the Internal audit
.
Publicly-traded corporations typically have an internal audit
ing department, led by a Chief Audit Executive ("CAE") who generally reports to the Audit Committee
of the Board of Directors
, with administrative reporting to the Chief Executive Officer
.
The profession is unregulated, though there are a number of international standard
setting bodies, an example of which is the Institute of Internal Auditors
("IIA"). The IIA has established Standards for the Professional Practice of Internal Auditing and has over 150,000 members representing 165 countries, including approximately 65,000 Certified Internal Auditors.
The CAE is intrinsically an independent function; otherwise it is dysfunctional and useless (but there are many degrees in the level of independence and efficiency). The CAE function exists only to constitute a second-level of control/evaluation in the organisation, which must be independent from the first-level control (the first-level layer belongs to the management of an organisation, who is responsible in the first instance for acting in compliance with the organisation’s rules). An effective independence is the result of both an attitude of CAE, and of prerogatives/guarantees conceded by the organisation or given by the organisation’s principals (e.g., the Board of Directors).
, to enable unrestricted evaluation
of management
activities and personnel. This can be analysed in the different points below:
All the elements below should be granted to the CAE in the basic rules of the Organisation, or stated in the Charter of audit
approved by the audit committee
and promulgated in the organization (IIA
Standard 1110 Organizational Indenpendance, and standard 1000C1).
CAEs may advise management (must, when it is about compliance
, risk management
, internal control
s...) and the Board of Directors
(or similar oversight
body) regarding how to better execute their responsibilities. But he remains independent of the activities he controls.
of management's activities. This is typically the Audit Committee
, a sub-committee of the Board of Directors
. To provide hierarchical independence, most Chief Audit Executives report to the Chairperson of the Audit Committee as to the performance of his duties.
The definition (and regular revision) of the scope of the function should be agreed between the CAE and the Audit Committee
. The Internal Audit’s annual work plan, which for practical reasons must be discussed with the auditees, is subject to the approbation of the sole Audit Committee
, board of directors
, or other appropriate governing authority (IIA Standard 1110 Organizational Indenpendance).
The internal rules and practices of the Directorate Internal Audit (audit manual) are of the responsibility of the CAE.
should have sole competence
for the final decision on appointment and dismissal
of the CAE”, and for his remuneration, activity appraisal and career
advancement.
The CAE is liable to disciplinary action but only with the concurrence of the Audit Committee
. This could happen if he is negligent in the performance of his duties.
and the Board
. There should be a report from the CAE to each ordinary Audit Committee
meeting and if deemed necessary to the Board
. Such reports should be addressed directly to the Chairman of the Audit Committee
with parallel copy to the Director-General
.
However, the CAE in the performance of his daily work communicates and liaises with the Director-General
and the staff of the Organisation.
. The best practice is that the Audit Committee
's opinion is required on the CAE’s draft budget, well in advance of the normal budgeting process of the organisation.
- Considers the input of senior management
, senior departmental management, of the audit committee
;
- the internal audit plan usually address financial reporting and other fundamental controls
, to be coordinated with the audit plan of the statutory auditor
Ensure that internal auditors have appropriate professional qualifications and skills, and opportunities for sufficient training and development to maintain and develop their internal auditing competence and to obtain Certified Internal Auditor certification
.
supervision is provided. Supervision
is a process begins with planning and continues throughout the examination, evaluation
, communication, and follow-up phases of the engagement.
NB: Generally accepted auditing standards
and International Standards on Auditing
are external audit standards.
or management
practice that may be of significance.
The Chief Audit Executive
(CAE) reports the most critical issues to the Audit Committee
quarterly, along with management's progress towards resolving them. Critical issues typically have a reasonable likelihood of causing substantial financial or reputational damage to the company. For particularly complex issues, the responsible manager may participate in the discussion. Such reporting is critical to ensure the function is respected, that the proper "tone at the top" exists in the organization, and to expedite resolution of such issues. It is a matter of considerable judgment to select appropriate issues for the Audit Committee's attention and to describe them in the proper context.
data.
Some results are identified below:
External audit
Auditor General
- Auditor General of National Audit Offices :*Auditor General of the Australian National Audit Office*Auditor General of Canada*Auditor General of China*Auditor General of Pakistan*Auditor General for Scotland*Auditor-General...
, or Controller
Comptroller
A comptroller is a management level position responsible for supervising the quality of accounting and financial reporting of an organization.In British government, the Comptroller General or Comptroller and Auditor General is in most countries the external auditor of the budget execution of the...
General is a high level independent corporate executive with overall responsibility for the Internal audit
Internal audit
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
.
Publicly-traded corporations typically have an internal audit
Internal audit
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
ing department, led by a Chief Audit Executive ("CAE") who generally reports to the Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
of the Board of Directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
, with administrative reporting to the Chief Executive Officer
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
.
The profession is unregulated, though there are a number of international standard
International standard
International standards are standards developed by international standards organizations. International standards are available for consideration and use, worldwide...
setting bodies, an example of which is the Institute of Internal Auditors
Institute of Internal Auditors
Established in 1941, The Institute of Internal Auditors is a guidance-setting body. Serving members in 165 countries, The IIA is the internal audit profession's global voice, chief advocate, recognized authority, and principal educator, with global headquarters in Altamonte Springs, Fla., United...
("IIA"). The IIA has established Standards for the Professional Practice of Internal Auditing and has over 150,000 members representing 165 countries, including approximately 65,000 Certified Internal Auditors.
The CAE is intrinsically an independent function; otherwise it is dysfunctional and useless (but there are many degrees in the level of independence and efficiency). The CAE function exists only to constitute a second-level of control/evaluation in the organisation, which must be independent from the first-level control (the first-level layer belongs to the management of an organisation, who is responsible in the first instance for acting in compliance with the organisation’s rules). An effective independence is the result of both an attitude of CAE, and of prerogatives/guarantees conceded by the organisation or given by the organisation’s principals (e.g., the Board of Directors).
Independent attitude
The CAE should be independent in the performance of his duties, so that he can carry out his work freely without admitting interference, and as objectively as possible. Independence permits him to render impartial and unbiased judgements, which are essential to the proper evaluation of management and controls. It also allows him to view the financial actions, procedures and decisions in a detached way.Organizational independence
To perform their role effectively, CAEs require organizational independence from managementManagement
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
, to enable unrestricted evaluation
Evaluation
Evaluation is systematic determination of merit, worth, and significance of something or someone using criteria against a set of standards.Evaluation often is used to characterize and appraise subjects of interest in a wide range of human enterprises, including the arts, criminal justice,...
of management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
activities and personnel. This can be analysed in the different points below:
- (for a different analysis of Independence, see organizational independence analysed by the IIA)
All the elements below should be granted to the CAE in the basic rules of the Organisation, or stated in the Charter of audit
approved by the audit committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
and promulgated in the organization (IIA
Institute of Internal Auditors
Established in 1941, The Institute of Internal Auditors is a guidance-setting body. Serving members in 165 countries, The IIA is the internal audit profession's global voice, chief advocate, recognized authority, and principal educator, with global headquarters in Altamonte Springs, Fla., United...
Standard 1110 Organizational Indenpendance, and standard 1000C1).
Independent function: no conflict of interest allowed
Even though the CAE may be formally part of the management structure of the Organisation (among the “Chief Executives”), he does not participate in any management decision process or accept any responsibility in the execution of company activities.CAEs may advise management (must, when it is about compliance
Compliance (regulation)
In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Regulatory compliance describes the goal that corporations or public agencies aspire to in their efforts to ensure that personnel are aware of and take steps to comply with relevant laws and...
, risk management
Risk management
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
, internal control
Internal control
In accounting and auditing, internal control is defined as a process effected by an organization's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives. It is a means by which an organization's...
s...) and the Board of Directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
(or similar oversight
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
body) regarding how to better execute their responsibilities. But he remains independent of the activities he controls.
Hierarchical independence (from the authority of the controlled Organisation; i.e. independent reporting line)
The primary customer of internal audit activity is the entity charged with oversightRegulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
of management's activities. This is typically the Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
, a sub-committee of the Board of Directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
. To provide hierarchical independence, most Chief Audit Executives report to the Chairperson of the Audit Committee as to the performance of his duties.
The definition (and regular revision) of the scope of the function should be agreed between the CAE and the Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
. The Internal Audit’s annual work plan, which for practical reasons must be discussed with the auditees, is subject to the approbation of the sole Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
, board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
, or other appropriate governing authority (IIA Standard 1110 Organizational Indenpendance).
The internal rules and practices of the Directorate Internal Audit (audit manual) are of the responsibility of the CAE.
Independent status (guarantees against retaliations)
The independence of the CAE in the performance of his duties should be guaranteed in the Staff Rules. The Audit CommitteeAudit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
should have sole competence
Competence
Competence may refer to:*Competence , the ability of a cell to take up DNA*Competence , the resistance of a rock against either erosion or deformation...
for the final decision on appointment and dismissal
Dismissal
Dismissal or dismissed may refer to:Dismissal*In litigation, a dismissal is the result of a successful motion to dismiss. See motion *Termination of employment, the end of an employee's duration with an employer...
of the CAE”, and for his remuneration, activity appraisal and career
Career
Career is defined by the Oxford English Dictionary as a person's "course or progress through life ". It is usually considered to pertain to remunerative work ....
advancement.
The CAE is liable to disciplinary action but only with the concurrence of the Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
. This could happen if he is negligent in the performance of his duties.
Independent communication right
The CAE reports directly to the Audit CommitteeAudit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
and the Board
Board
-Flat surface:* Lumber, or other rigid material, milled or sawn flat** See :Category:Engineered wood** Cutting board** Sounding board, of a musical instrument* Cardboard* Paperboard*Corrugated fiberboard*Fiberboard*Particle board, also known as chipboard...
. There should be a report from the CAE to each ordinary Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
meeting and if deemed necessary to the Board
Board
-Flat surface:* Lumber, or other rigid material, milled or sawn flat** See :Category:Engineered wood** Cutting board** Sounding board, of a musical instrument* Cardboard* Paperboard*Corrugated fiberboard*Fiberboard*Particle board, also known as chipboard...
. Such reports should be addressed directly to the Chairman of the Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
with parallel copy to the Director-General
Director-general
The term director-general is a title given the highest executive officer within a governmental, statutory, NGO, third sector or not-for-profit institution.-European Union:...
.
However, the CAE in the performance of his daily work communicates and liaises with the Director-General
Director-general
The term director-general is a title given the highest executive officer within a governmental, statutory, NGO, third sector or not-for-profit institution.-European Union:...
and the staff of the Organisation.
Independent budgeting
Although CAEs and internal auditors are paid by the company, the human resource budget of the Directorate of Internal Audit, in particular, should be protected from interference from the audited Organisation. The typical risk is that the audit's budget subject to the approval of Director of HR and of the DG is a source of potential interference or friendly pressure to self-limit the CAE’s critic exercise of an independent viewpoint. An appeal to the Board, even expressly foreseen as part of the communication right of the CAE, is often ineffective on short-term imposed constraints, given the time constraints of the budget processBudget process
A budget process refers to the process by which governments create and approve a budget, which is as follows:* The Financial Service Department prepares worksheets to assist the department head in preparation of department budget estimates...
. The best practice is that the Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
's opinion is required on the CAE’s draft budget, well in advance of the normal budgeting process of the organisation.
Access to information
Information is of key importance to organize, prepare and perform internal audits. Restricting access to the information strictly necessary to the performance of currently opened audit missions is the best way to hinder the efficiency of the Directorate Internal Audit. It triggers requests to the auditor for justifications, delays, embarrassment etc. It is also a way to affect the daily working conditions of the auditors, and implicitly induce them to self-limit their critic exercise of independent auditing.Status, strategy and organisation of the internal audit department
- Ensure that the status (e.g. stipulated in an audit charter), strategyStrategyStrategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked...
, resources of the internal auditInternal auditInternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
department are aligned and are consistent with the organization's objectives and governanceGovernanceGovernance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes...
policy. - Establish appropriate policies and procedures to guide the internal auditAuditThe general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.- Accounting...
function, and ensure the quality of the assurance servicesAssurance servicesAssurance service is an independent professional service, typically provided by CPAs, with the goal of improving the information or the context of the information so that decision makers can make more informed, and presumably better decisions...
delivered.
Management, supervision of the internal audit activity
- Obtain (or manage the production of) a risk analysisRisk analysis (Business)Risk analysis is a technique to identify and assess factors that may jeopardize the success of a project or achieving a goal.This technique also helps to define preventive measures to reduce the probability of these factors from occurring and identify countermeasures to successfully deal with these...
;- Ensure that the risk assessmentRisk assessmentRisk assessment is a step in a risk management procedure. Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat...
is done at least annually; - Establish risk-based audit plans to set out the priorities of the internal auditInternal auditInternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
function, consistent with the organizational objectives.
- Ensure that the risk assessment
- Considers the input of senior management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
, senior departmental management, of the audit committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
;
- the internal audit plan usually address financial reporting and other fundamental controls
Management accounting
Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control...
, to be coordinated with the audit plan of the statutory auditor
Statutory auditor
A is an official found in Japanese kabushiki kaisha .Statutory auditors are elected by shareholders and hold a position in the hierarchy alongside the board of directors. A kabushiki kaisha must have at least one statutory auditor, unless the transfer of shares is restricted in the articles of...
- Coordinate internal auditAuditThe general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.- Accounting...
ing activities and plans with other internal and external providers of assuranceAssurance servicesAssurance service is an independent professional service, typically provided by CPAs, with the goal of improving the information or the context of the information so that decision makers can make more informed, and presumably better decisions...
and consulting activities to ensure proper coverage and minimize duplication of effort. - Communicate plan of engagements and resource requirements for the internal audit function, including significant interim changes to the audit committeeAudit committeeIn a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
. This communication shall include the impact of resource limitations. - Ensure that internal audit resources are appropriate, sufficient and effectively deployed to achieve the internal audit plan approved by the Audit Committee or the Board.
Ensure that internal auditors have appropriate professional qualifications and skills, and opportunities for sufficient training and development to maintain and develop their internal auditing competence and to obtain Certified Internal Auditor certification
Certification
Certification refers to the confirmation of certain characteristics of an object, person, or organization. This confirmation is often, but not always, provided by some form of external review, education, assessment, or audit...
.
- Ensure the timely completion of internal auditing engagements.
- Ensure that reports on internal auditing engagementEngagement LetterAn engagement letter defines the legal relationship between a professional firm and its client...
s are provided to the audit committee with a minimum of delay. - Provide an annual holistic opinion on the effectiveness and adequacy of risk managementRisk managementRisk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
, controlManagement accountingManagement accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control...
, and governanceGovernanceGovernance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes...
processes.
Quality management
The CAE is responsible for assuring that appropriate engagementEngagement Letter
An engagement letter defines the legal relationship between a professional firm and its client...
supervision is provided. Supervision
Supervisor
A supervisor, foreperson, team leader, overseer, cell coach, facilitator, or area coordinator is a manager in a position of trust in business...
is a process begins with planning and continues throughout the examination, evaluation
Evaluation
Evaluation is systematic determination of merit, worth, and significance of something or someone using criteria against a set of standards.Evaluation often is used to characterize and appraise subjects of interest in a wide range of human enterprises, including the arts, criminal justice,...
, communication, and follow-up phases of the engagement.
- Develop and maintain a quality assuranceQuality AssuranceQuality assurance, or QA for short, is the systematic monitoring and evaluation of the various aspects of a project, service or facility to maximize the probability that minimum standards of quality are being attained by the production process...
and improvement program that covers all aspects of the internal audit function, and continuously monitor its effectiveness. - In collaboration with the audit committee, ensure that a practice inspectionInspectionAn inspection is, most generally, an organized examination or formal evaluation exercise. In engineering activities inspection involves the measurements, tests, and gauges applied to certain characteristics in regard to an object or activity...
or other external review of the internal audit function is conducted at least every 3 years, by a qualified, independent external review team, and that the results of this external assessment are communicated to the audit committee. - Ensure that professional internal auditing standards are followed (e.g. IIAInstitute of Internal AuditorsEstablished in 1941, The Institute of Internal Auditors is a guidance-setting body. Serving members in 165 countries, The IIA is the internal audit profession's global voice, chief advocate, recognized authority, and principal educator, with global headquarters in Altamonte Springs, Fla., United...
standards or local standards).
NB: Generally accepted auditing standards
Generally Accepted Auditing Standards
Generally Accepted Auditing Standards, or GAAS are sets of standards against which the quality of audits are performed and may be judged...
and International Standards on Auditing
International Standards on Auditing
International Standards on Auditing are professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants through the International Auditing and Assurance Standards Board .-Respective responsibilities:*ISA...
are external audit standards.
- Report at least annually to the audit committee on the internal audit function's conformance with professional internal auditing standards.
Reporting of critical findings
Inform the Audit Committee without delay of any issue of risk, controlManagement accounting
Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control...
or management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
practice that may be of significance.
The Chief Audit Executive
Chief Audit Executive
The Chief Audit Executive , Director of Audit, Director of Internal Audit, Auditor General, or Controller General is a high level independent corporate executive with overall responsibility for the Internal audit....
(CAE) reports the most critical issues to the Audit Committee
Audit committee
In a U.S. publicly-traded company, an audit committee is an operating committee of the Board of Directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee...
quarterly, along with management's progress towards resolving them. Critical issues typically have a reasonable likelihood of causing substantial financial or reputational damage to the company. For particularly complex issues, the responsible manager may participate in the discussion. Such reporting is critical to ensure the function is respected, that the proper "tone at the top" exists in the organization, and to expedite resolution of such issues. It is a matter of considerable judgment to select appropriate issues for the Audit Committee's attention and to describe them in the proper context.
Survey results
Various consulting and public accounting firms perform research on audit committees, to provide benchmarkingBenchmarking
Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost...
data.
Some results are identified below:
- 54% of committee members surveyed felt the audit committee was "very effective," while 38% indicated "somewhat effective."
- Risk management, internal controlInternal controlIn accounting and auditing, internal control is defined as a process effected by an organization's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives. It is a means by which an organization's...
, and accounting estimates and judgments were the top priority areas for 2007. - 41% were "very satisfied" with the internal audit function, while 52% were "somewhat satisfied."
- Two-thirds felt the Chief Internal AuditInternal auditInternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
position was for a professional internal auditor, rather than as a "stepping stone" to other roles.
See also
- ComptrollerComptrollerA comptroller is a management level position responsible for supervising the quality of accounting and financial reporting of an organization.In British government, the Comptroller General or Comptroller and Auditor General is in most countries the external auditor of the budget execution of the...
- Lead AuditorLead AuditorMost Publicly-traded corporations typically have an internal auditing department, led by a Chief Audit Executive , with lead internal auditors managing small teams of internal auditors for one audit engagement...
- ControlManagement accountingManagement accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control...
- COSO framework
- Audit riskAudit riskAudit risk refers to acceptable audit risk, i.e. it indicates the auditor's willingness to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion was issued...
- Financial auditFinancial auditA financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion...
- Green GlobeGreen GlobeGreen Globe is based on Agenda 21 principles for Sustainable Development endorsed by 182 Heads of State at the United Nations Rio De Janeiro Earth Summit . Green Globe Certification and Green Globe Asia Pacific deliver separate certification services and standards to the travel & tourism as well...
- Information technology auditInformation technology auditAn information technology audit, or information systems audit, is an examination of the management controls within an Information technology infrastructure. The evaluation of obtained evidence determines if the information systems are safeguarding assets, maintaining data integrity, and operating...
- Internal auditInternal auditInternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk...
- Institute of Internal AuditorsInstitute of Internal AuditorsEstablished in 1941, The Institute of Internal Auditors is a guidance-setting body. Serving members in 165 countries, The IIA is the internal audit profession's global voice, chief advocate, recognized authority, and principal educator, with global headquarters in Altamonte Springs, Fla., United...
- Corporate governanceCorporate governanceCorporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
- ISA 310 Knowledge of the BusinessISA 310 Knowledge of the BusinessISA 310 Knowledge of the Business is one of the International Standards on Auditing. It serves to expect the auditors are to have necessary knowledge of the client's business...
External audit
- Certified Public AccountantCertified Public AccountantCertified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
(CPA) - External auditor
- Statutory auditorStatutory auditorA is an official found in Japanese kabushiki kaisha .Statutory auditors are elected by shareholders and hold a position in the hierarchy alongside the board of directors. A kabushiki kaisha must have at least one statutory auditor, unless the transfer of shares is restricted in the articles of...
- Auditor GeneralAuditor General- Auditor General of National Audit Offices :*Auditor General of the Australian National Audit Office*Auditor General of Canada*Auditor General of China*Auditor General of Pakistan*Auditor General for Scotland*Auditor-General...
- Government audit
- INTOSAI