CEO Executive AssistantInternal audit occupies a unique position in the finance CEO’s governance framework. Unlike other functions where the CEO delegates authority to a leader who reports upward, internal audit operates with independence from management and reports to the board’s audit committee. This structural independence is essential to internal audit’s value but creates specific governance dynamics that finance CEOs must navigate carefully.
Internal Audit’s Unique Position
Internal audit provides independent assurance to the board and management that the institution’s risk management, control, and governance processes are functioning effectively. This assurance function requires:
Independence from management. The Chief Audit Executive (CAE) must be free to audit any function, including areas reporting directly to the CEO. This independence is compromised if the CEO can redirect or limit audit activities.
Direct board access. The CAE should have direct access to the board’s audit committee, without needing to route communications through the CEO or other management.
Objective reporting. Audit findings and ratings must reflect actual conditions. Management pressure to soften findings undermines audit quality and regulatory credibility.
These requirements mean that the finance CEO does not “manage” internal audit in the way they manage other functions. Instead, the CEO works with internal audit as a governance partner.
The CEO’s Appropriate Role with Internal Audit
Finance CEOs play a specific role in internal audit governance:
Providing organizational support. The CEO creates the organizational conditions for effective internal audit: adequate resources, appropriate reporting structure, and a culture that treats audit findings as valuable rather than threatening.
Supporting audit access. The CEO should ensure that internal audit has unrestricted access to personnel, systems, and information throughout the institution.
Receiving audit reports. Finance CEOs should receive audit reports on significant matters, treating them as valuable management information.
Owning remediation. While internal audit identifies issues, management owns the remediation. The CEO should ensure that significant audit findings receive prompt attention and adequate resources for remediation.
Not directing audit priorities. The CEO should not direct which areas internal audit covers or avoid. Audit planning belongs to the CAE in consultation with the audit committee.
For context on how internal audit integrates with the broader governance framework, finance CEO delegation covers the multi-function governance picture.
Supporting Internal Audit Effectiveness
Finance CEOs support internal audit effectiveness through:
Adequate resourcing. Internal audit must have sufficient staff, technical expertise, and technology to audit the institution effectively. Finance CEOs should ensure the internal audit budget is adequate, not routinely cut as a cost-reduction target.
CAE selection and support. The CAE should be a highly capable professional with appropriate experience and qualifications. Finance CEOs should advocate for CAE compensation that reflects the role’s importance.
Culture that respects audit. Finance CEOs who treat audit findings as opportunities for improvement rather than embarrassments create cultures where audit is more effective.
Business context provision. Finance CEOs can add value by providing business context for the audit plan: what areas are changing most rapidly, where management has concerns, and what strategic priorities create governance challenges. This input informs audit planning without directing it inappropriately.
Managing Audit Findings
When internal audit identifies issues, the finance CEO’s response matters:
Take findings seriously. Finance CEOs who dismiss or minimize audit findings undermine the governance function and signal to the organization that controls are not important.
Assign remediation ownership. Significant audit findings should have a named owner accountable for remediation, a defined timeline, and regular progress reporting.
Track remediation. A systematic process for tracking open audit findings through to remediation, with CEO visibility into the most significant items, ensures that issues are resolved rather than deferred indefinitely.
Investigate recurring issues. When the same issue surfaces in multiple audit cycles, it indicates a systemic problem. Finance CEOs should investigate why recurring issues are not being resolved.
The CEO-CAE Relationship
The relationship between the CEO and CAE should be one of mutual respect and professional engagement:
Regular meetings. Finance CEOs should meet regularly with the CAE to understand the audit program, discuss emerging concerns, and ensure that the CAE has the organizational support they need.
Candid communication. The CAE should feel free to discuss audit concerns candidly with the CEO, including concerns about areas that report to the CEO or about management responses to findings.
No surprises principle. While audit findings should not be softened for management, the CAE should ensure that the CEO is not surprised by significant findings when they are presented to the audit committee. Pre-notification of material findings allows the CEO to prepare a thoughtful management response.
The finance delegation guide addresses how internal audit investment connects to the overall governance and capital framework.
Audit Committee Coordination
Because internal audit ultimately reports to the audit committee:
Supporting audit committee governance. Finance CEOs should ensure that the audit committee has the information it needs to exercise effective oversight of internal audit.
Not interfering with audit committee-CAE relationship. The direct relationship between the audit committee and the CAE is essential and should not be intermediated by management.
Using audit committee findings. When the audit committee identifies governance concerns through its oversight of internal audit, finance CEOs should treat these as important signals requiring attention.
Using Audit Intelligence Strategically
Finance CEOs who use internal audit intelligence strategically get more value from the function:
Systemic issue identification. Individual audit findings may be symptoms of systemic issues. Finance CEOs who look for systemic patterns in audit findings address root causes rather than just symptoms.
Audit as market intelligence. Internal audit often identifies how processes, controls, and cultures are actually working at the operating level, information that may differ significantly from what senior management believes. Finance CEOs should treat this ground-level information as valuable.
Competitive benchmarking. External audit firms often have peer institution perspective on control quality. Finance CEOs should ask whether audit findings suggest that the institution’s control environment is stronger or weaker than peers.
Common Mistakes in CEO-Internal Audit Relationships
Treating audit as compliance theater. Finance CEOs who create the appearance of supporting internal audit without genuine engagement get less value and less credibility with regulators.
Pressuring CAE on findings. Pressuring the CAE to soften findings or change ratings undermines audit independence and creates regulatory and governance risk.
Under-resourcing audit. Chronic under-resourcing of internal audit creates coverage gaps and talent quality issues that degrade audit effectiveness.
Treating audit findings as personal criticism. Finance CEOs who react defensively to audit findings in areas under their oversight create cultures where the CAE hesitates to surface important concerns.
Measuring Internal Audit Effectiveness
Finance CEOs should evaluate internal audit effectiveness through:
- Quality of audit findings (identifying real, material issues before they become larger problems)
- Timeliness and clarity of audit reporting
- Management’s ability to remediate findings within agreed timelines
- External quality assessment results
- Regulatory examiner perspective on internal audit quality
- CAE and audit team retention
Conclusion
Finance CEOs do not manage internal audit in the traditional sense; they support and partner with it. This requires creating the organizational conditions for effective audit, receiving and acting on audit findings constructively, and respecting the independence that makes audit valuable. Finance CEOs who understand this governance relationship lead institutions that maintain higher quality control environments and maintain regulatory credibility with examiners who look closely at the effectiveness of internal audit.
Related Reading
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