Fraud risk as internal audit fails

A survey of largely FTSE100 audit committee chairmen by PricewaterhouseCoopers has found that, in many cases, not enough reliance is being placed on internal audit to help them effectively carry out their role.

Many of the respondents questioned the skills and status that their internal audit functions possess to enable them to play a full role in the risk assessment process, with large numbers relying more on the track record of executive management or their external auditors for assurance.

Some questioned the independence of the function, as it often reports to the finance director.

‘Internal audit should act as the eyes and ears or in many cases the conscience of the business,’ said Jennifer Matheson, director for PwC’s internal audit services. ‘This is not yet happening to the extent that it should.’

She added that, if not addressed, there was potential for greater exposure to risk, but audit committees had probably prioritised their time effectively so far.

The survey also found that many were unaware of new Turnbull requirements for the audit committee to objectively assess the performance of internal audit annually, and to have an external evaluation every five years.