describe the role of each of the following in the establishment maintenance and eval 640861

Micro Systems, a developer of database software packages, is a publicly held company and listed with the SEC. The company has no internal audit function. In complying with SOX, Micro Systems has agreed to establish an internal audit function and strengthen its audit committee to include all outside directors. Micro Systems has held its initial planning meeting to discuss the roles of the various participants in the internal control and financial reporting process. Participants at the meeting included the company president, the chief financial officer, a member of the audit committee, a partner from Micro Dynamics’ external audit firm, and the newly appointed manager of the internal audit department. Comments from the various meeting participants are presented below. President: We want to ensure that Micro Systems complies with SOX. The internal audit department should help to strengthen our internal control system by correcting problems. I would like your thoughts on the proper reporting relationship for the manager of the internal audit department. CFO: I think the manager of the internal audit department should report to me because much of the department’s work is related to financial issues. The audit committee should have oversight responsibilities. Audit committee member: I believe we should think through our roles more carefully. The Tread way Commission has recommended that the audit committee play a more important role in the financial reporting process; the duties of today’s audit committee have expanded beyond mere rubber stamp approval. We need to have greater assurance that controls are in place and being followed. External audit firm partner: We need a close working relationship among all of our roles. The internal audit department can play a significant role in monitoring the control systems on a continuing basis and should have strong ties to your external audit firm. Internal audit department manager: The internal audit department should be more involved in operational auditing, but it also should play a significant monitoring role in the financial reporting area.

Required

a. Describe the role of each of the following in the establishment, maintenance, and evaluation of Micro Systems’ internal control.

Management

Audit committee

External auditor

Internal audit department

b. Describe the responsibilities that Micro Systems’ audit committee has in the financial reporting process.