A recent article published in Corporate Compliance Insights discusses the importance

and benefits of internal audit functions to publically traded companies and potential investors.

Author Richard Chambers, CEO of the Institute of Internal Auditors, begins with a bold statistic

stating 55% of Americans invest their hard earned money in the stock market, leaving their

future financial well-being in the hands of the companies in which they invest in. With this many

Americans turning towards the stock market to invest, some research should be conducted before

doing so. Many people believe investigating the backgrounds the Board of Directors of a

company is sufficient enough before investing. Although that is a good place to start, a potential

investor should also ask himself “How effectively are risks managed?”, “How ethical is the

culture?”, and most importantly, ”How strong is the control environment?”

. A lack of internal audit controls should be a red flag to investors about the way a

company is managed. Although having internal audit functions does not guarantee absolute

assurance, not having these functions should raise questions. Potential investors should have a

higher degree of confidence in companies that have internal audit functions as opposed to

companies without them. However, investing in companies still has risks regardless if there are

mandated internal audit functions in place. Internal audit functions do not completely guarantee a

safe investment, but provides assurance that operations within a company are being conducted in

compliance with regulations.

In class the importance of audits of internal controls over financial reporting was

discussed. These audits are performed to prove that internal controls were put into place and

abide by the established criteria. Under the