Chief Audit Executives – Appointment, Performance Evaluation, and Termination

This article covers the various factors senior management and the board of directors should consider when appointing, evaluating, or terminating the Chief Audit Executive (CAE). The position of the CAE is important and requires independence and objectivity while also partnering with the organization and adding value.

Appointing a CAE

CAEs should demonstrate the following soft skills:

• Ability to accurately assess situations and instinctively do the right thing even under resistance

• Good judgment and character strength
• Integrity

In addition, effective CAEs possess the following attributes and skills:

• Independence and objectivity
• Intellectual curiosity
• Quality focused
• Business and technical skills
• Communication and listening skills
• People management

Evaluating the CAE

The internal audit activity is generally more effective when the board and senior management complete regular (at least annual) formal reviews of the CAE. The evaluation should include criteria related to the CAE’s required attributes and skills identified during appointment (reference above section).

Terminating the CAE

When the CAE voluntarily terminates, the board should complete an exit meeting or questionnaire with the CAE to identify the reasons for resignation and determine if anything requires further attention. Also, the Board should verify that the CAE is not facing pressure to quit and the termination is genuinely voluntary, not voluntary in appearance only.

The Board should oversee involuntary termination of the CAE and verify the termination is justified and appropriate. Valid reasons for termination include:

• Failure to meet stipulated professional performance requirements
• A breach of the IIA’s Code of Ethics or the organization’s Code of Conduct
• Non-conformation with the IIA’s International Standards for the Professional Practices of Internal Auditing

Conclusion

Following appropriate guidelines when hiring, evaluating, and terminating a CAE leads to a more successful internal audit function.

McKonly & Asbury is available for consultation on this or other Internal Audit matters. Please do not hesitate to contact, Elaine Nissley, MBA, CISA, PMP, CRISC, Principal, in charge of the Risk Management Services group at ENissley@macpas.com.

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[i] The Practice Guide – Chief Audit Executives – Appointment, Performance Evaluation, and Termination is located at http://www.theiia.org/guidance/standards-and-guidance/ippf/practice-guides/caes-appointment-evaluation-termination/