Role Of Internal Auditor & CSR

A basic principle of governance is

• Assessment of the governance process by an independent internal audit activity.

• Holding the board, senior management, and the internal audit activity accountable for its effectiveness.

• Exclusive use of external auditors to provide assurance about the governance process.

• Separation of the governance process from promoting an ethical culture in the organization.

Answer explanation

The internal audit activity must assess and make appropriate recommendations for improving the governance process.

The internal audit activity should contribute to the organization’s governance process by evaluating the processes through which

1. Ethics and values are promoted.

2. Effective organizational performance management and accountability are ensured.

3. Risk and control information is communicated.

4. Activities of the external and internal auditors and management are coordinated.

• 1 only

• 4 only

• 2 & 3 only

• 1,2,3,4

Answer explanation

The internal audit activity must assess and make appropriate recommendations to improve the organization’s governance processes for:

1. Making strategic and operational decisions;

2. Overseeing risk management and control;

3. Promoting appropriate ethics and values within the organization;

4. Ensuring effective organizational performance management and accountability;

5. Communicating risk and control information to appropriate areas of the organization; and

6. Coordinating the activities of, and communicating information among, the board, external and internal auditors, other assurance providers, and management (Perf. Std. 2110).T

Craig is the chief audit executive (CAE) of Marlin, Inc., and is in the process of planning an assessment of governance at Marlin. Which of the following should Craig consider in planning the assessment of governance?

• A. Whether all major decisions have been authorized by senior management.

• B.Whether he can rely on the assessment of internal control performed by external auditors

• C.Whether the organization promotes an ethical culture.

• D.All of the answers are correct.

Answer explanation

Answer (D) is correct.
The CAE should consider the following in planning assessments of governance:

1. An audit should address controls in governance processes that are designed to prevent or detect events that could have a negative effect on the organization;

2. Controls within governance processes often are significant in managing multiple risks; and,

3. If other audits assess controls in governance processes, the auditor should consider relying on their results.

Thus, Craig should consider all of the answer choices when planning the assessment of governance.

A CSR audit procedure requires the internal auditor to determine if the organization’s code of conduct includes provisions on anti-corruption. This procedure is most likely testing which CSR element?

• A.Working conditions.

• B.Environment.

• C.Governance.

• D.Ethics.

Answer explanation

A CSR audit of the ethics element typically includes determining whether the organization reflects an anti-corruption culture, as evidenced, for example, in the organization’s risk assessment, code of conduct, or policies.

The risks of not having an effective corporate social responsibility (CSR) program most likely include

• A.Proaction.

• B.Disclosure of CSR performance.

• C.Performance of CSR audits.

• D.Operational failures.

Answer explanation

Operational pressure points (e.g., environmental effects of processes or products) may indicate risks. Risks also result from, for example, not achieving CSR objectives because of inappropriate CSR strategies or overemphasis on CSR strategies.

The Global Reporting Initiative (GRI) has developed a sustainability reporting framework that

• A.Emphasizes how to implement and manage a CSR initiative.

• B.Provides specific guidance on measuring CSR performance.

• C.Manages the disclosure of CSR to stakeholders.

• D.Provides a forum in which governments can work together to share experiences and to seek solutions to common problems.

Answer explanation

The GRI has developed a sustainability reporting framework that provides specific guidance on measuring CSR performance against predefined criteria.