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CS Professional · Internal and Forensic Audit · Emerging Issues and Challenges

During a review at Meera Logistics Ltd., the internal auditor finds that the CFO overrode a control to release a vendor payment and the CFO also oversees the internal audit budget. The auditor fears retaliation if she reports it. Which course best preserves the integrity of the internal audit function?

She should report the override to the Audit Committee, relying on a charter that gives the function direct access to it. Functional reporting to the committee, rather than to the CFO being reviewed, protects independence and ensures the control override is addressed, while hiding or delaying it would undermine the function.

  1. ADrop the matter since the CFO controls the budget
  2. BMention it verbally to the CFO and not record it
  3. CWait until the statutory auditors discover it
  4. DReport it to the Audit Committee, supported by a charter giving the function direct access to itCorrect

Explanation

Independence requires functional reporting to the Audit Committee or board, not dependence on the executive being audited. Reporting through that line, backed by the charter, protects the auditor and ensures the override is addressed. The other options conceal or delay the finding.

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