Some internal auditors take the view that the

internal audit profession should require that

internal audit functions adopt a simple, yet

sensible, grading or ranking of their engagement

reports to better communicate their overall

conclusions expressed in these reports. They

propose that an overall rating be included in the

audit report for each business unit or function

audited. The purpose of the rating is to indicate

the design adequacy and operating effectiveness

of internal controls. For example, one proposed

rating system is:

A. Controls are designed adequately and operating effectively

to provide reasonable assurance that risks

are being managed to an acceptable level.

B.Some opportunities for improvement were identified;

generally, however, controls are designed

adequately and operate effectively to provide reasonable

assurance that risks are being managed to

an acceptable level.

C. Significant opportunities for improvement were

identified. Numerous specific control weaknesses

were noted, resulting in areas where controls areunlikely to provide reasonable assurance that risks

are being managed to an acceptable level.

D. Unsatisfactory. Controls are designed inadequately

and/or operating ineffectively; therefore, thereis no

reasonable assurance that risks are being managed

toan acceptable level.

Present arguments for and against the use of internal

audit ratings.Do you believe the use of ratings is appropriate

or not? Explain your reasons.