Where the Internal Audit Function Fits in within Myer Holdings - Assignment Example

Semester 1, 2012 Where the internal audit function fits in within Myer Holdings 1. According to the board of directors of Myer holdings, its internal Audit function is an independent function which gives objective assurance and consulting services that are aimed at adding value and improve the organization’s internal controls. As such, the function helps the board in accomplishing its objectives through a systematic and disciplined approach of evaluating and improving the effectiveness of risk management, internal controls and corporate governance processes. The function is charged with the responsibility of assessing, analyzing and monitoring Myer’s organizational risk as well as controls. The internal audit function also reviews internal control procedures and ensures compliance with the policies and procedures. Owing to the nature and amount of responsibility placed on this function, the office works in conjunction with management and provides the board through the finance and audit committee with assurances that internal control procedures are in place, risks are reduced or mitigated. It also points out wherever there is need fore improvement so as to enhance control processes, policies and procedures. As such, the internal audit function is an independent function within the finance department that is answerable to the chief executive officer and the managing director thorough the chief finance officer. In other words, the office is not directly controlled by the chief finance officer but is independent despite being found in the finance department due to the nature of its responsibility. This is because it also audits the finance department among other departments despite being found in the department. 2. The attitude of the board of directors and senior management to internal control and its importance for the business; The board of directors and the top management takes seriously the issue of internal control. According to the board chairman, the board and the top management of the company are responsible for setting up policies regarding the business and affairs of Myer for the benefit of its various stakeholders. This includes the appraisal of the company’s strategies, performance as well as policies on behalf of the shareholders. As such the board constantly monitors, monitors and ratifies systems of risk management as well as internal controls while ensuring legal and ethical compliance. In order to ensure that the company strictly adheres to proper internal controls, the board has set up an internal audit department. The division is headed by assurance manager who reports to the board through the chief finance officer. The division is charged with the responsibility of carrying out time to time systematic monitoring of internal control activities. As such, the division highlights any weaknesses in the company’s internal control system and suggests improvements continuously. In addition, the board has established the audit, finance and risk committee which works closely with both internal and external auditors in a bid to ensure sound internal control procedures within the company. The committee is responsible for advising the board on the company’s internal control programs and related areas of risk. This is in addition to designing of proper policies and procedures to address any internal weaknesses with advice from the internal audit division. Through the internal audit division, the committee also carries regular audit on the internal controls in order to test their adequacy and compliance to laid down policies and also carry out corrective actions if need be in a bid to reduce any weaknesses in internal controls. 3. The company’s structure is shown in the chart below; The company has a very strong company structure that is important in the fulfillment of every days mandate as well as ensuring that control policies, procedures and systems are always in place and are being adhered to. The board of directors is the highest organ of authority in the company. Currently headed by Howard McDonald, the board is responsible for coming up with policies and strategies for maximizing stockholders wealth. It also ensures that systems of controls are in place and running. The board mainly performs its functions through its various committees and subcommittees. Just below the board is the chief executive officer who is also the managing director of the company. The current CEO is Bernie Brooks and is responsible for the day today operations of the company. As such, he is directly responsible for ensuring that a sound system of internal controls is in place and running at all times. The chief finance officer is another executive director of the company who is directly under the CEO. The CFO is responsible for the finance function of the company. As such, the internal control function of the company fits in his office. In fact, the internal audit functions though an independent office is a division in the finance department. As such, the CFO ensures that internal control systems and procedures are always in place and running. This he does with the help of the finance, audit and risk committee of the board as well as the internal audit function. Other senior executive management officers who operate directly under the CEO include the executive general manager for stores who oversees the operations of the Myer network of stores. Under him are the various store managers. Other senior management managers include executive manager business services, the group general manager property, store development and services, the general manager marketing and brand development as well as the general manager merchandise. A look at the company’s structure clearly indicates where the internal control function fits within the organization. The internal control function directly fits in the finance department headed by the CFO. However, every department is responsible for implementation of proper control procedures in the department while the board through the Finance, Audit and Risk committee facilitates this. 4. In a bid to ensure that the system of internal control is in fact being followed, the board has set up an internal audit function which is charged with the responsibility of coming up with proper internal control procedures and ensuring that they are followed by various departments within the company. The board of Directors has also set up an Audit, finance and risk committee. The committee reports to the board and is charged with the responsibility of ensuring proper implementation of internal control procedures. the committee also facilitates ensures a good relationship between the board and both the internal and external audit function thus facilitating them in their work while ensuring that their recommendation regarding internal controls are implemented on a timely basis and adhered to at all times. The major functions of the committee with regard to internal controls include; a) Ensuring good relationship between the board and the company’s internal audit function. In this regard, the committee ensures that the function has enough resources to perform its work and coordinates well with the external auditor. The committee also approves the internal audit program while reviewing its appropriateness and independence. b) Overseeing Myer’s internal controls as well as systems. In this regard, the committee ensures that the recommendations regarding internal controls by both internal and external auditors are implemented and functioning at all times. This serves to minimize risks associated with weaknesses in the internal control systems. Read More