“DUAL REPORTING LINES

AND ORGANIZATIONAL
INDEPENDENCE”

PRESENTED BY: MINGLANA, MITCH T.

 DUAL REPORTING LINES

• Is where people from the organization report formally to more than one manager. Let’s
say for instance this one employee will report to the CEO or to the board of directors.
Attribute standard of IAA 1100, that to assist the independence and objectivity
of IAA, dual reporting lines should be present. Under the dual reporting lines is
the Functional reporting and administrative reporting.
• Functional reporting is connected to the engagements and their results. The Chief audit executive
reports functionally to the board. While the Administrative Reporting is the reporting
relationship within the management structure that facilitates the IIA’s day-to-day operations. The
Chief audit executive reports administratively to upper management (CEO).

• Furthermore, the Support from senior management and the board assists the internal audit activity
in gaining the cooperation of engagement clients and performing their work free from interference.
 
• While the chief audit executive (CAE), reporting functionally to the board and administratively
to the organization’s chief executive officer, facilitates organizational independence. At a
minimum, the CAE needs to report to an individual in the organization with sufficient authority to
promote independence and to ensure broad audit coverage, adequate consideration of engagement
communications, and appropriate action on engagement recommendations .
• Back to Functional Reporting- it is said that this type of reporting is
ultimately the source of independence and authority for the internal audit
activity. Let’s find out the reason, A functional reporting relationship
establishes a connection between positions or organizational units at
different management levels based on the specialized nature of the
function for which a mutual responsibility is shared. In this type of
situation – often referred to as an indirect reporting relationship –
the higher level position or unit provides functional guidance and
support to positions or units lower in the organizational structure.
 ORGANIZATIONAL INDEPENDENCE
The chief audit executive must report to a level within the organization that allows the internal audit activity to
fulfill its responsibilities. The chief audit executive must confirm to the board, at least annually, the organizational
independence of the internal audit activity. Examples of functional reporting to the board involve:
• Approving the internal audit charter;
• Approving the risk based internal audit plan;
• Approving the internal audit budget and resource plan;
• Receiving communications from the chief audit executive on the internal audit activity’s performance relative to its
plan and other matters;
• Approving decisions regarding the appointment and removal of the chief audit executive;
• Approving the remuneration of the chief audit executive; and
• Making appropriate inquiries of management and the chief audit executive to determine whether there are
inappropriate scope or resource limitations.
• According to standard 1110.A1 – The internal audit activity must be free from
interference in determining the scope of internal auditing, performing work, and
communicating results. The chief audit executive must disclose such interference to the
board and discuss the implications.
•