Should Internal Audit Report to the CFO?

Posted on October 21st, 2006

Who does your head of internal audit report to? If your company is like many, the chief internal auditor reports to the chief financial officer (CFO). That makes sense to some because they are both a part of the finance function. However, that’s not the best control a company could have.

It’s recommended that the head of internal audit report to the chief executive officer (CEO) and the audit committee.

Why? If the CFO is the boss of the chief internal auditor, how can the auditor be objective about the books and records for which the CFO is responsible? Audit committees, on the other hand, offer the internal auditor the opportunity to report findings objectively. Reporting to the CEO has its advantages as well. Such a structure communicates to the auditors that the audit function is a priority.

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Comments (1)

  • Dan Meyer
    25 October 2006 at 11:56 am |

    Moody’s did a good job of addressing this issue in a recent manuscript for Audit Committees. The electronic version of the document can be linked through http://www.fei.org.

    Reply

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