Internal_Controls

Internal Auditor Ron Mathieu ACC/544 July 29, 2013 Joseph Poletti Internal Auditor A recommendation has been made for a publicly traded company to hire an internal auditor to clean up an out of control system. An out of control system could mean many things but none of them are desirable for any company especially one that is publicly owned. The company needs to maintain accurate financial records and produce correct financials statements. This means adhering to General Accepted Accounting Principles (GAAP) as well as remaining compliant with external governing bodies such as the Securities Exchange Commission (SEC). While many companies outsource the internal audit function to external auditing companies, there are distinct advantages to hiring an internal auditor for this situation. As previously stated, the company has an out of control system. This will require quite a bit of time for the organization to transition into possessing an in control system. Outsourcing external auditing companies may be the best option for one that already has an in control system but for this situation, hiring an internal auditor will be more efficient and less costly. The internal auditor will communicate often with management and other key executives making changes and suggestions to the current system all while maintaining independence and objectivity. “Ongoing monitoring is an integral part of the day-to-day supervision, review, and measurement of the internal audit activity. Ongoing monitoring is incorporated into the routine policies and practices used to manage the internal audit activity and uses processes, tools, and information considered necessary to evaluate conformance with the Definition of Internal Auditing, the Code of Ethics, and the Standards” (theiia.org, attribute standard 1311, 2013). Another role of the internal auditor is to establish procedures that improve corporate governance and operational procedures. This will include eliminating current controls to implementing new ones, recommending software upgrades, and producing reports outlining ways for managers to look for holes in the system. The internal auditor, while on staff, would be able to make more effective recommendations pertaining to these items as well as have a better idea of managements risk tolerance. The position of internal auditor requires that person to have at minimum a four year degree preferably in business or accounting. Most companies will also require at least two years of internal auditing experience. Possessing a Master’s degree would substitute for one year of experience if that degree is specific to accounting or auditing. The candidate would also need to be adept at compliance, regulatory processes, and ethics. A further recommendation would require the candidate to be a Certified Internal Auditor (CIA). This would ensure the candidate meets the educational requirements, as well as the needed continuing education keeping them abridged to the ever changing rules of compliance and other regulatory requirements (2013). It would be beneficial if the candidate also has experience in this industry. This would provide an easier transition and a faster timeline for rectifying the problematic status quo of the current control system. The audit committee has recommended Matt Fallon for the job of internal auditor. He has a Master’s degree in accounting and an undergrad degree in business administration. He has five years of experience as an internal auditor all in this industry. He is certified by the CIA and is current on his continuing education. Mr. Fallon can start right away and has been briefed on the needs of our company. His responses assured us he is the right man for the job. He maintained that ethics should be the backbone of the auditing profession and has a clean background. The committee has checked his references and they all gave him strong recommendations. Mr. Fallon should prove to be a valuable asset to the organization. The internal audit is a vital component for maintaining corporate governance, improving operational activities, and producing accurate financial reports. While it is commonplace to outsource this important function, hiring an internal auditor is less costly and more efficient. The organization in question is suffering from an out of control system and hiring an internal auditor is the best option to right the ship due to the time requirement of transitioning into a company that possesses an in control system. The internal auditor will be able to effectively communicate with the management team and other key officers to improve the current system and implement new controls to keep the company running smooth for years to come. References (theiia.org, attribute standard 1311, 2013). Retrieved from: http://www.theiia.org/guidance/standards-and-guidance/ippf/standards/full-standards/'search=risk