By: argentina e. morata

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INTERNAL AUDIT FUNCTION &THE CONTROLLER’S ROLE IN INVESTOR’S RELATIONS

INTERNAL AUDIT FUNCTION &

THE CONTROLLER’S ROLE IN INVESTOR’S

RELATIONS

By: Argentina E. Morata

What is Internal Audit?

“…an independent, objective, assurance and consulting activity

designed to add value and improve an organization’s

operations..”

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The Institute of Internal Auditors https://na.theiia.org/about-us/about-ia/Pages/About-the-Profession.aspx

Reporting relationship

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“It creates a potential conflict if the internal auditors report directly to the

CFO,” - Dave Richards, president Institute of Internal Auditors

Department Review

• Internal Audit staff role is to review and report on the operations of the accounting and finance staffs, because these reports tend to focus on problems they do not cast the management of the accounting and finance department in an overly favorable light.

Controller can still have a considerable amount of control over the annual list of audits that the department conducts. ControllerSenior accounting officer in the companyIs in the best position to spot the problem areas and request audits that will highlight any problems.The manager of the internal audit staff will recognize that the controller is more senior in the corporate hierarchy, and so it is good idea to at least listen to any recommendations for future audits.

Internal Audit Objectives & Activities

That control systems will adequately safeguard company assets• Cash: Verify that there are adequate controls over petty cash.• Inventory: Verify that there are sufficient safeguards against the loss of inventory. • Supplies: Verify that there is a sufficient degree of control over the purchase,

storage, and use of supplies.

That the company is following operating policies and procedures– Verify from a sample of expense reports that only those approved types of

travel expenses are being reimbursed.– Verify that financial statements are published within specified due dates.

That computer systems are accurately processing data

– Verify from a sample of transactions that the computer system is correctly calculating accounting transactions.

– Verify that data from an acquired company is accurately entered into the existing computer system. 4

That the company is following an approved set of ethical guidelines– Verify from training records that each employee has received at least the

minimum number of ethics training hours per year.– Verify that the training materials used to teach ethics to employees contain

information that matches and supports the principles described in the company's official ethics policy.

That the department provides written reports of its findings to those levels of management needing the information in order to correct faulty systems

– Verify that feedback is solicited from auditees regarding the findings and

recommendations made in audit reports.– Verify the degree to which recommendations have been implemented,

subsequent to the release of audit reports.

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Internal Audit Objectives & Activities

Need for Internal Audit

What is its value to the organization?

Need for Internal Audit

What is its value to the organization?

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• Increased size and complexity of businesses • Focus on risk management and internal controls to manage them • Unconventional business models • Intensive use of information technology • An increasingly competitive environment• Fraud Detection• Consulting and Operations

The expertise and knowledge of internal auditors can help in the following areas:

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Composition of Audit Committee

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Arm of the board of directors 3-5 members of the board Not a part of company management

Purpose:To provide oversight of the financial reporting process, the audit process, the

system of internal controls and compliance with laws and regulations.

Role of Audit Committee

o Tasks related to company managemento Tasks related to external auditorso Tasks related to internal auditso Tasks related to financial systems

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Controller’s Role i n

Investor’s Relations

Objectives of the Investor’s Relations Function

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• The principal purpose of the Investors Relations function, regardless of who performs it, is the enhancement of shareholder value.

• One of the purposes of sound financial policy is to enable the company to raise funds, on an acceptable basis, to meet its needs, so as to enhance the long-term interests of the shareholder; and a related corollary is to cause the entity to be so well regarded in the financial market place that its stock will command an acceptable price/earnings ratio.

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Communication Vehicles for Investor Relations

Communication Vehicles for Investor Relations

• The several vehicles now commonly used to communicate with “investor relations customer” may be helpful.

• It must more closely align itself with the strategic plans of management and tell

its customers more about corporate goals and the entity’s strengths and weaknesses”.

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Role of Controller and Other Principal

Role of the Controller

• Information resource • An interpreter • Communicator• Prepares, or reviews • Reviewer

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If the controller is a good financial analyst, certain activities will tend to be assigned to this position

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if the chief accounting officer is, in addition, a good presenter or communicator, then still other duties are likely to fall in this direction.

• Principal communicator of financial policy• Principal spokesman or negotiator• delegate to the controller any of the above duties• Review all major published financial documents

Chief Executive Officer

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For the typical medium-sized to large company, where the CEO is somewhat active in IR

•Preside over major meetings•Meet, on a one-to-one basis or with a few individuals•Important financing matters•Address important company matters

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