Question

discuss why the internal audit function organizational status, competences and objectivity are particularly important when considering fraud by senior management. why might a cae reporting directly to the cfo, ceo general counsel or controller be more problematic than reporting to the audit committee (or equivalent)

Internal auditing: assurance & advisory services 4th edition

Answer 1

Ans:-

In any company it is very deficult to detection of fraud done by the senior management. So, internal audit functions of organization,competences and objectivity plays a major role for detecting those fraud.

Managers has control on major activities in a company.He use his skills and talent to cover the fraud.

So the auditor of company considers internal functions of a company and audits those function by taking test of control into consideration.

1) Internal audit functions of organization will influence the performance of managers. If the internal functions are strict it is difficult to do the fraud by the managers.

2) The competence of management will also influence the performance of the managers.If the competences is more then the manager will do fraud by using is competence then it is difficult to find out those fraud.

3) Objectivity of the company is also an important because by using objectives the company can restrict the managers to a particular area and then it some what difficult to do fraud.

So in any company manager's paly an important role because they have a control over the affiers of the company. So there is a chance to commite fraud by the manager's. By applying above procedure we can control the happening of fraud to some extent.

And if any fraud identified by the company members. It is better to discuss those frauds with the CEO,CFO,and Controllers of the company before reporting to audit committee.

Because audit committee will directly discuss those fraud with the members of the company in Annual General Meeting. But the CEO can take a respected action to avoid the fraud and minimise those fraud before reporting of financial statements.

Any frauds identified by the Audi committee then the committee disclosses those frauds directly in audited financial statements.