Chagter 1 Aading and temal C 3. Role of Internal Audit Function Nano Circuits Inc. is a publichy traded company that peo- duces electronic oontrol circuts, which ae sel in ma products. In an effort to comply with SO, Nano is in the process of establishing an in-hoose intermal sodt fonction which previously had bem outsournd The compnY began this peocess by hiring a Diretor of Inteal Audits Nano Circuits CEO recemtly called a planeing moting to discuss the roles of key corponate participants negnding the implememtation and maintemance of imemal coe Central to this decision is the organizational placement of the futuge intermalde etion and to whom the new Director of Internal Audit should report. In addition Nano Circuits considered the need to reconstitute s Beard of Directors Audit Commitee. Participants at the meeting incladed the company president, the dchief finan cial officer, a member of the audit commime, a partmer from Nano Circuits external adit firm, and the Director of Internal Audits. Expectations and concerns presemed by the meeting participants are summarised nest CEO: The CEO expressed concers that Nano Cr- cuits complies with SOX and PCAOB requirements and recommendations The intermal audit function should strengthen the organization's internal control system by developing control policies and procedures and by detecting violations of policies and procedures CFO: The CFO saw the role of the internal audt function as one that should be focused primarily on financial issues and therefore, the director of Internal Audits should report to the CFO Audit committee member: The commitee mem- ber felt strongly that the Audit Committee as currently constituted is appropriate and no changes need to be made. Although none of the commiter members are trained accountants they all have estensive industry experience, they have all been associated with Nano Cir cuits in various capacities for many vears, and are well qualified to fulfl their policy-oversight responsibilities External audit partner: The external audit partnen pointed out that the internal audit fnction should be organized such that it supports a close working relation- ship with the external auditors. This would include monitoring internal control systems on a continuing basis to provide a body of evidence on which the exter- nal auditor can rely Director of Internal Audits The Director of Inter nal Audits argued that the new 1A function should focus more on operational auditing issues, but it also should play a role in the review of internal controls over finan cial reporting Describe the role that cach of the following areas has in the establishment, maintenance, and evalua- tion of internal control Required a. Chagter 1 Aading and temal C 3. Role of Internal Audit Function Nano Circuits Inc. is a publichy traded company that peo- duces electronic oontrol circuts, which ae sel in ma products. In an effort to comply with SO, Nano is in the process of establishing an in-hoose intermal sodt fonction which previously had bem outsournd The compnY began this peocess by hiring a Diretor of Inteal Audits Nano Circuits CEO recemtly called a planeing moting to discuss the roles of key corponate participants negnding the implememtation and maintemance of imemal coe Central to this decision is the organizational placement of the futuge intermalde etion and to whom the new Director of Internal Audit should report. In addition Nano Circuits considered the need to reconstitute s Beard of Directors Audit Commitee. Participants at the meeting incladed the company president, the dchief finan cial officer, a member of the audit commime, a partmer from Nano Circuits external adit firm, and the Director of Internal Audits. Expectations and concerns presemed by the meeting participants are summarised nest CEO: The CEO expressed concers that Nano Cr- cuits complies with SOX and PCAOB requirements and recommendations The intermal audit function should strengthen the organization's internal control system by developing control policies and procedures and by detecting violations of policies and procedures CFO: The CFO saw the role of the internal audt function as one that should be focused primarily on financial issues and therefore, the director of Internal Audits should report to the CFO Audit committee member: The commitee mem- ber felt strongly that the Audit Committee as currently constituted is appropriate and no changes need to be made. Although none of the commiter members are trained accountants they all have estensive industry experience, they have all been associated with Nano Cir cuits in various capacities for many vears, and are well qualified to fulfl their policy-oversight responsibilities External audit partner: The external audit partnen pointed out that the internal audit fnction should be organized such that it supports a close working relation- ship with the external auditors. This would include monitoring internal control systems on a continuing basis to provide a body of evidence on which the exter- nal auditor can rely Director of Internal Audits The Director of Inter nal Audits argued that the new 1A function should focus more on operational auditing issues, but it also should play a role in the review of internal controls over finan cial reporting Describe the role that cach of the following areas has in the establishment, maintenance, and evalua- tion of internal control Required a
