The Board of ABC, a large drinks manufacturer, decided to set up an internal audit function. The proposal was appointing an internal auditor at mid-management level who would report directly to the finance director. ABC had recently expanded its product range, and this had created the need for greater control over internal activities. The need was highlighted by a recent event where internal quality checks were not carried out and thousands of units of production were wasted as a result. The board discussed whether to promote internally or appoint the new internal auditor from outside the company and they also expressed concerns over the authority the internal auditor may expect. Although they recognised the post as important, they believed too much authority might compromise the operational effectiveness of other departments. Required: a. Discuss the issues raised by the Board of ABC regarding the appointment of an internal auditor. In your discussion, recommend how the issues can be resolved. b. Describe the process the internal auditor would have to undertake in auditing theorganisation.
The Board of ABC, a large drinks manufacturer, decided to set up an internal audit function. The proposal was appointing an internal auditor at mid-management level who would report directly to the finance director. ABC had recently expanded its product range, and this had created the need for greater control over internal activities. The need was highlighted by a recent event where internal quality checks were not carried out and thousands of units of production were wasted as a result. The board discussed whether to promote internally or appoint the new internal auditor from outside the company and they also expressed concerns over the authority the internal auditor may expect. Although they recognised the post as important, they believed too much authority might compromise the operational effectiveness of other departments.
Required: a. Discuss the issues raised by the Board of ABC regarding the appointment of an internal auditor. In your discussion, recommend how the issues can be resolved.
b. Describe the process the internal auditor would have to undertake in auditing the
organisation.
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