Moodys View of Internal Audit Best Practices Recently, Moodys Investors Services issued a special comment describing best practices for the role of audit committees in overseeing the internal audit function. The special comment was part of a series of Moodys reports that describe the benchmarking procedures it uses to evaluate the quality of a companys corporate governance in its determination of the companys debt rating. Moodys comments, for example, on the timeliness and comprehensiveness of internal audit coverage: The audit committee should ensure that the timeliness of the audits, by risk category, is appropriate, and ensure a process is in place to revisit the cycle on at least an annual basis. In Moody's view, for large firms, a full audit cycle of three years generally seems appropriate; that is, the whole organization should be audited in an appropriate manner within three years. High risk areas should be audited at least annually. There will be times when there is some slippage due to the annual re-assessment of the firm's risk profile. However, Moody's takes the view that no auditable unit should go un-audited for longer than four year. A. Do you agree with Moodys position that all auditable units should be audited at least once every four years? Justify you answer. B. Moodys also takes the position that it is best practice for internal auditors to adopt a simple, yet sensible, rating system to help users understand and evaluate the information contained in internal audit reports. 1. Present the arguments for and against audit ratings. 2. Do you agree with Moodys position? Explain