Business Case

John Jenkins

MBA 717

2/22/10

CASE 1

PART A

1) What is internal auditing?

a. It is a service provided by professionals that evaluate a company’s internal operations. Auditors provide assurance that the internal controls in place are functioning adequately and efficiently. Auditors are concerned with control, risk management and governance processes.

2) Why should an organization have internal auditing?

b. A company should have internal auditing to provide stakeholders with assurance that the company is functioning in accordance with all regulations and it has efficient operations.

3) What should be the reporting lines for the CAE?

c. It is very important for the CAE to have total independence in order to avoid any conflicts of interest. To ensure independence, the CAE should have two reporting lines: one for direction and accountability, and one for administrative purposes. The CAE reports directly to the audit committee or the most senior oversight group for direction and accountability. The CAE reports to executive management for administrative purposes.

4) How does internal auditing maintain independence and objectivity?

d. Independence is maintained by the dual reporting relationship discussed in question 3 (executive management and the most senior oversight group)

e. In order to maintain objectivity, the internal auditor cannot establish any sort of relationships that would create bias. This means avoiding personal and professional involvement with the area being audited.

5) How do internal and external auditors differ and how do they relate?

f. They relate in that they are both independent of the activities they audit.

g. They differ by the fact that internal auditors are part of the organization they are auditing and external auditors are independent from the organization. Internal auditors are also concerned with both financial and non-financial matters, while external...