During the management seminar that you attended recently, you heard the following comments made by Nora Hunt, the president of a major company:

I do not quite understand what this whole army of internal auditors is doing in the private sector. They are certainly useful in the public sector, where they must make sure that a whole multitude of laws, regulations, and directives are followed to the letter. But the situation is quite different in private business, where profit is an important source of motivation.

After having given it considerable thought, I do not quite see what positive contribution a group of internal auditors could make to our company, or what management could expect from this function. I do not see how internal auditing could contribute to improving the quality of management in our company.

We already spend a fortune on the annual audit of our financial statements, and our external auditors are very competent; furthermore, in contrast to internal auditors, they are independent from management. In any event, the work done by our external auditors gives us assurance that everything is well managed in our company and that we are well protected against fraud.

Otherwise, they would not be able to give an unqualified opinion on our financial statements year after year.

Required

Comment on Noras statement and identify arguments that could convince her of the usefulness of the internal audit function in a large company. Within your answer be sure to include references to IIA Standards, COSO and the Fraud Triangle as described in the following video: https://www.youtube.com/watch?-yBwCg