Some facts:
- The primary customer of the internal audit function is the audit committee.
- The primary responsibility of the audit committee is oversight of financial reporting to the SEC.
- Few internal auditors provide an opinion on the consolidated financial reports.
- Reliance is placed on the external auditors to provide assurance on the consolidated financials.
- The audit committee is charged with oversight of the external auditors.
How can the audit committee do a reasonable job of assessing the external auditors? I don’t think they can rely on the PCAOB.
Audit Committee Blueprint by the NACD with the help of KPMG has some useful content. What it lacks, and this is not surprising given that they worked with KPMG, is content that focuses on the quality of the external audit team.
They talk about the quality and focus of internal audit. They talk about the oversight of risk. But when it comes to the external auditor, they are more concerned with getting their thoughts on the company and its operations than whether they are sufficiently competent.
A publication of the Center for Audit Quality, External Auditor Assessment Tool helps more.
But how does the audit committee obtain the information necessary for an objective assessment of the external auditor?
The internal audit team can and, in my opinion, should…
