Big4Guy

Audit Committees have taken centerstage post sarbanes oxley. The gamut of responsibilities of audit committees have increased many fold. From the perspective of Chief Audit Executive CAE of an organization, there arises a question "Whom should the CAE report to in the organization?". The answer to this question can be found in the IIA practice advisory 1110-2 which talks about reporting lines for the CAE. The practice advisory states that -

"The Chief Audit Executive should report to a level within the organization that allows the internal audit activity to accomplish its responsibilites".

Ideally, to maintain independence, the CAE should report functionally to the audit committee and administratively to the chief executive officer CEO. This dual reporting by the CAE ensures that an organization meets independence and corporate governance objectives. Today, the internal audit function not only acts as a helping hand to the audit committee and senior management, but also is reponsible for management's objectives for reliable financial reporting, alongwith ensuring efficiency and effectiveness of operations. All said and done, it is very important internal audit acts in a dual capacity, reporting administratively to the CEO and functionally to the audit committee.

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