The Internal Auditor's primary line of reporting should be to the AC Chairman although the Internal Auditor would also report administratively to the CEO.
The AC approves the hiring, removal, evaluation and compensation of the head of the internal audit function, or the accounting / auditing firm or corporation to which the internal audit function is outsourced. The Internal Auditor should have unfettered access to all the company's documents, records, properties and personnel, including access to the AC.
This Guideline states that the internal auditor reports to the AC, and that the auditor should have unfettered access to perform its work.
The primary role of the internal auditor is to conduct routine and ad hoc internal control reviews of the company. To do this effectively, he should be independent of the management of the company.
Hence, the internal audit head should report directly to the Audit Committee (AC) and its Chairman, and have full access to the AC. Key decisions about the hiring, removal, evaluation and compensation of the internal audit head should lie with the AC and not management. Where the internal audit function is outsourced, the AC should decide on the appointment and compensation of the outsourced firm.
However, it is recognised that if the internal audit function is internal (i.e. not outsourced), as a matter of practicality, the internal auditor would also report administratively to the CEO. Notwithstanding this, if he is to adequately perform his job, the internal auditor needs unfettered access to the company’s documents, records, properties and personnel.
B. SGX Disclosure Guide
- Does the Company have an internal audit function? If not, please explain why.
C. Related Rules and Regulations
D. CG Guides
- AC Guide 4.3: Scope of Internal Audit [Internal Audit].
- AC Guide 4.4: Establishing an Internal Audit Function [Internal Audit].
- AC Guide 4.5: The AC’s Engagement with the Internal Auditor [Internal Audit].
- AC Guide 4.7: The Internal Auditor’s Independence and Standing [Internal Audit].
- AC Guide Case Study 4B-5: Independence of IA [Internal Audit].
- AC Guide Appendix 4D: Sample Internal Audit Charter [Internal Audit].
- AC Guide Appendix 4J: Internal Audit Reporting [Internal Audit].
E. Related Articles