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Every audit committee should assess the effectiveness of the organization’s internal audit function at least annually, if not throughout the year. The critical role that internal audit plays requires the audit committee to ensure that the organization receives substantial benefits from the investments made in the internal audit function. Though the charter, scope, funding and activities of internal audit vary from company to company, audit committees should at least consider the following questions when evaluating their company’s internal audit function:

What should the audit committee’s relationship be with an organization’s board of directors, compensation committee, disclosure committee, and nominating and governance committee?

10 Important Roles of the Audit Committee in Internal Audit

Although the exact nature, charter, scope and reporting lines of internal audit may vary between companies, the audit committee plays a key role in supporting and overseeing aspects of an internal audit function’s activities. While needing to ensure that it does not assume day-to-day oversight activities on behalf of management or the internal audit function, the audit committee should generally be involved in the following matters:

What is the Second Line of Defense?

Essential to effective risk management, the lines-of-defense model is implicit in COSO’s internal control framework through the control environment, control, activities, monitoring and other components of an internal control system. It provides assurance to the board of directors, as the elected representatives of the shareholders to oversee the organization’s operations on their behalf, that risks are reduced to a manageable level as dictated by the organization’s appetite for risk. Much more than “segregating incompatible duties” and “ensuring checks and balances,” the lines-of defense model emphasizes a fundamental concept of risk management: From the boardroom to the customer-facing processes, managing risk is everyone’s responsibility.

Communicating with shareholders is about capital – the ability to access either equity or debt at the lowest possible cost. By understanding investor motivation and maintaining relationships within the investment community, companies are strategically positioned to address operational funding issues proactively and thus can exercise greater control over the capital formation process. By identifying sources of capital, world-class companies can maintain capital structures through a mix of long-term debt and equity funding options at the lowest possible cost.

What is internal auditing?

What is Organizational Alignment Risk?

Organizational alignment is defined as a conscious and systematic coordination and alignment of three powerful and interrelated driving forces: organizational strategy, organizational culture and organizational infrastructure. Organizational alignment is to be mutually supportive and contribute as efficiently and effectively as possible to meet organizational goals and objectives.