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Effective Relationship Management With Auditors

Internal auditors should work together with external auditors to form a positi

Maintaining a healthy, appropriate relationship with an external auditor is an important way to boost credibility with investors, as well as stay on top of regulatory changes and other aspects of risk management

Maintaining a healthy, appropriate relationship with an external auditor is an important way to boost credibility with investors, as well as stay on top of regulatory changes and other aspects of risk management. Here are some ways to foster an effective working relationship.

Establish trust: This is the foundation upon which all other dealings with an audit committee will be based. While the Chief Audit Executive can foment a certain level of trust with the committee chair by explaining the company's internal audit results and his or her personal opinions regarding the best ways to approach compliance and reporting issues, trust is a two-way street. Audit committee chairs must also share the committee's goals for the process, and openly and honestly communicate any concerns that may arise. A solid work relationship is essential to the auditing process, but CAEs and committee chairmen should never forget they are dealing with people. Simply getting to know the members of an auditing committee on a personal level can help build trust, which will ease all other aspects of the professional relationship.

Maintain communication: The CAE and committee chair must keep an open line of communication at all times. One way to ensure direct communication is for CAEs to attend audit committee meetings, according to the Institute of Internal Auditors. By allowing the CAE to present his or her audit plans, findings and reports directly to the committee, misinterpretation can be minimized. The CAE and committee chair should also meet at regular intervals to discuss the audit process without other committee members or company executives hampering the discussion, the IIA suggests.

Keep some distance: The external auditor has a very specific role to play in the business world, and it can become problematic if a committee or committee chair is thought to be too close to the institution being audited. This has become a major topic of debate in recent months as more governments and accounting standards boards are recommending changes to the ways auditors interact with companies. One major proposal has been imposing an auditor rotation schedule to prevent auditors from working too long with a single company. Proponents of the plan say it will help maintain healthy skepticism on the part of the external auditors, while detractors say institutional knowledge will be lost and the process will become less efficient. By maintaining distance from the outset of a relationship, auditors could be free to form independent analyses while maintaining a long relationship with a company.

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