The Board of ABC, a large drinks manufacturer, decided to set up an internal audit function. The

proposal was appointing an internal auditor at mid$-$management level who would report directly

to the finance director.

ABC had recently expanded its product range, and this had created the need for greater control

over internal activities. The need was highlighted by a recent event where internal quality checks

were not carried out and thousands of units of production were wasted as a result.

The board discussed whether to promote internally or appoint the new internal auditor from

outside the company and they also expressed concerns over the authority the internal auditor may

expect. Although they recognised the post as important, they believed too much authority might

compromise the operational effectiveness of other departments.

 

 

Required:

a$.$ Discuss the issues raised by the Board of ABC regarding the appointment of an internal

auditor. In your discussion, recommend how the issues can be resolved.