April 7, 2013
Relationships between senior management and internal auditors are imperative to a business. The relationship ensures the business is staying compliance with regard to Sarbanes Oxley and at times the SEC. The internal auditor relays this information to management, operations management, as well as audit committees. It is important to focus on keeping a separated role for an internal auditor because the senior manager as previously referenced only cares about the bottom line and how their paycheck is affected. The senior manager should not be the internal auditor because it is difficult to then separate tasks of a senior manager to those of an internal auditor. Sometimes it the two roles can create an atmosphere of chaos.
The fact remains that conflict will occur between internal auditing and senior management. Senior management may not always see “compliance” as being cost effective or unnecessary. It should be the responsibility of the internal auditor to remind senior management of the effects caused by not warranting compliance. In cases of conflict having a third party present to mediate could be beneficial to both parties. Not to mention, when there are multiple people involved having a third opinion that can grasp both sides creates a winning environment or at least allow both parties to achieve a common ground. There are relationships currently compromising independence. These relationships include as previously mentioned overlapping responsibilities. For example, in the case of a small business reporting annually around $5 million dollars the Controller is usually the person serving as the internal auditor, senior management, and somewhat of an operations manager. In this case, the relationship does not exist to create independence. Another example would be a business where these roles do not allow the other party to complete his or her job. Another situation where these relationships would compromise independence would occur if the internal auditor did not have an unbiased opinion going into this role. It would not be favorable to place…