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Hi, Ken.
I your P3 Lecutre 13 notes, Internal Auditors report to Board.
Is Board in your notes equal to management?
General internet sources say internal auditors report to management.
Do they mean managers or board of directors (I assume board of directors consist of NEDs as well and therefore shall not be equal to managment?)
And you also say Internal auditor report to audit committee on a day-to-day basis? If this is so, since audit committee in best practice only consist of NEDs, internal auditors are not reporting to management on a day-to-day basis at all.
What’s the correct understanding?
Besides, BPP text says recommendation of appointment of auditors are made by audit committee. Since audit committee is a sub-board management group. Can i also say it is board responsibility to make recommendation on appointment of auditors either internal or external?
Often, in the notes, management = board. The board is the top layer of management.
Internal audit are likely to report both to the managers of the departments concerned, and high up the chain so that the performance of those managers can be monitored.
Reporting regularly to the audit committee rather than the general board makes sense as many on the general board will not be very interested in the finer aspects o internal control. Reports would also go to the managers concerned.
The main board will delegate responsibility for auditor recommendation to the audit committee. The recommendation then has to be approved by the members.
“The main board will delegate responsibility for auditor recommendation to the audit committee. The recommendation then has to be approved by the members.”
So if a statement says
Board of Directors has the responsibilities to make recommendation for external auditors subject to shareholder’s approval.
Then this is correct?
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