Should the Chief Audit Executive Report to the Audit Committee or the Full Board?
Recent writings, including by Professor Andrew Chambers, discuss the potential for chief audit executives (CAEs) to have a real or perceived problem with their reporting relationship — even where they report functionally to the audit committee (or equivalent) and only administratively to a member of executive management.
Do you believe any of these could result in either a real or perceived limitation on the objectivity or the performance of the CAE and the internal audit function?
- The CAE receives a bonus based primarily on corporate performance. While even a substantial part of the bonus may be based on individual or team performance, typically no bonus is paid unless the entity achieves financial or operating targets.
- The CAE has the title of "vice president" or similar, which sounds like a member of the management team.
- The CAE's compensation is set by management, with the concurrence of the audit committee.
- The CAE reports to the audit committee, but has no formal relationship with any other board committee (e.g., risk or governance) — or the full board.
- Although CAEs are hired only after an interview with the chair of the audit committee of the board, the only candidates presented are those selected by the finance organization.
Posted on Dec 29, 2008 by Norman Marks
Share This Article: