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Chapter 12 3 4

3.3 Qualities of an effective internal audit function

 Sufficiently resourced, both financially and in terms of qualified, experienced
staff

 Well organised

 Independent and objective.

 Chief internal auditor appointed by the audit committee

 No operational responsibilities

 Work plan agreed by the audit committee.

 No limitation on the scope of their work i.e. full access to every part of the
organisation.

3.4 Limitations of internal audit

 Internal auditors may be employees of the company they are reporting on and
therefore may not wish to raise issues in case they lose their job.

 In smaller organisations in particular, internal audit may be managed as part of
the finance function. They will therefore have to report on the effectiveness of
financial systems that they form a part of and may be reluctant to say their
department (and manager) has deficiencies.

 If the internal audit staff have worked in the organisation for a long time,
possibly in different departments, there may be a familiarity threat as they will
be auditing the work of long standing colleagues and friends.

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