Chamber’s biggest concern is that CFOs, who typically view themselves as the function’s caretaker, may unintentionally interfere with IA or be perceived as interfering within the organization. Chambers said, and IA’s tendency to retain responsibility for Sarbanes-Oxley (SOX) reporting can channel it toward the CFO. IA reporting to the CFO may be most appropriate in many cases, Mr.
Other perspectives. Each company is different.
“The skill set of the CFO is better aligned with what IA is trying to do, and having an informed sponsor or stakeholder is much more effective than having someone at the CEO level,” the executive said. Chambers’ poll may reflect what’s best theoretically, in practical terms reporting to the CFO is a more practical model. As is often the case, the company’s CFO once worked in IA and so understands it better than the CEO, he said. Supporting the CFO line. One member said IA would be way down the list of priorities of his company’s CEO, who is effectively the head of sales and dealing with a host of macro business issues. Chambers said, with 74% citing the CEO, 11% the CRO and the CFO at 9%. “My question was, ‘Ideally, where should IA report administratively within the organization?’ It wasn’t even a contest,” Mr. Chambers launched a poll on LinkedIn that drew 1,700 responses. The numbers. According to the IIA’s 2022 North American Pulse of Internal Audit report, 76% of chief audit executives (CAEs) say they work administratively for their CFOs. “When IA reports to the CFO, there tends to be a much higher incidence of it doing work in financial reporting and finance-related risks,” Mr. IA reporting to the CFO does not violate audit standards, but it may hinder it from carrying out its function fully, or at least foster that perception. Presenting to a meeting of NeuGroup for Internal Audit Executives, Richard Chambers, a former head of the Institute of Internal Auditors (IIA) and a longtime IA practitioner, noted that seeming disconnect as one of several alarm bells IA professionals should consider. More than three-quarters of US publicly traded companies’ internal audit (IA) functions report administratively to the CFO, although a similar percentage of IA professionals see reporting to the CEO as ideal. An IA expert says reporting to the CFO may divert IA resources disproportionally to finance vs other areas.
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