The establishment of an effective internal audit department ESTABLISHING AN EFFECTIVE Internal Audit Department

ESTABLISHING AN EFFECTIVE Internal Audit Department
Hugh D Pforsich, Bonita K Peterson Kramer, G Randolph Just: Strategic Finance., Montvale: Apr 2006.Vol.87, Iss.10; pg.22, 8pgs
Abstract
If you are wondering how to establish an effective internal audit department (IAD), The Schwan Food Co did just that with the help of Randy Just when he was the chief audit executive (CAE) at the company. Finding a qualified department head is a crucial first task in establishing an effective IAD. Once the CAE is hired, he / she should lead the development of the written audit charter, which sets forth the purpose, authority, and responsibilities of the IAD. Once the staffing was completed, Just worked with two of his managers to develop a risk-based assessment methodology tied to the Committee of Sponsoring Organizations of the Treadway Commission internal control framework and a consumer products business process model. The risk assessment framework closely incorporated the concepts of risk and control. In its first year, the department received a large number of requests for other projects, and that was clearly viewed as a substantial measure of success.
Full test
The demand for internal auditing services has skyrocketed with two recent events.
First, Section 404 of the Sarbanes-Oxley Act (SOX) mandated public companies to include with their annual report an internal control report that contains an assessment by management of the effectiveness of the company's financial reporting internal control system. Internal auditors have the technical expertise and professional objectivity to assist in this assessment process.
Second, the New York Stock Exchange required all listed companies to