Internal Audit and the Relationship with Senior Management Essay

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Pages: 6

Internal Audit and the Relationship with Senior Management

Summary: The case study “Internal Audit Reporting Relationships: Serving Two Masters” was a part of a series of research projects being developed by the Institute of Internal Auditors to determine the various relationships, specifically reporting relationships between the internal auditor and those charged with governance. To obtain research about the various types of reporting relationships, independence, conflicts that arise from these relationships and what services are to be provided in the internal audit practice, a survey was conducted where approximately 1600 Chief Audit Executives responded. Results showed that internal audit practice has three main customers who
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Senior management is concerned with improving activities that affect the bottom-line and potentially their bonuses, while operational management is concerned with efficiency and effectiveness of operations and then those charged with governance (audit committee and board of directors) are concerned with risk assessment and internal controls. Internal auditors must have an impartial, unbiased attitude and avoid any conflict of interest. Upon researching the topic at the Institute of Internal Auditors website they defined conflict of interest as follows: “Conflict of interest is a situation in which an internal auditor, who is in a position of trust, has a competing professional or personal interest. Such competing interests can make it difficult to fulfill his or her duties impartially. A conflict of interest exists even if no unethical or improper act results. A conflict of interest can create an appearance of impropriety that can undermine confidence in the internal auditor, the internal audit activity, and the profession. A conflict of interest could impair an individual's ability to perform his or her duties and responsibilities objectively” ( Conflicts of interest associated with the reporting relationships in the internal audit function can be managed by setting up an approved audit charter that focuses on the purpose, authority and responsibility of the internal audit department. The internal audit charter set the norm