Using an Internal Auditor

Using an Internal Auditor

ACC 544

Using an Internal Auditor

The purpose of this brief is to explain the benefits of using an internal auditor to a company with an out-of-control system and to refer a candidate qualified to assess properly the organization and make appropriate recommendations. The client firm is a public company required to comply with the regulations of the Securities and Exchange Commission (SEC).

Out of control system

The client recently came to the realization that all the company’s risk management efforts were informal responses to problematic situations and has a desire to implement strategic and systematic procedures. Cash receipts procedures were not always followed, the assets of the company were not well safeguarded, and inventory control was nonexistent. If, or when, departments do not work together to achieve the goals and accomplish effective integration of the plans, policies, and activities of the company there is a need to implement internal controls. The SEC requires management to take “responsibility for establishing and maintaining adequate internal control over financial reporting” to be in compliance with Section 404 of the Sarbanes-Oxley Act (SOX) and an internal auditor will attest to management’s assessment of internal controls (U.S. Securities and Exchange Commission, 2011, Summary).

Internal control systems

The foundation for an internal control system is management willing to set the proper tone for an environment that will operate with integrity and maintain ethical values. Internal control system designs include ways to safeguard assets, set procedures of control over cash, and protect inventory from risk of theft (Louwers, Ramsay, Sinason, & Strawser, 2007). The internal auditor knows an effective internal control system will proactively ensure operations and accounting systems accurately accomplish the intended functions and produce reports in compliance with SEC regulations. The client can expect...