March 9, 2013
Having an Internal Audit Function or having an effective Internal Audit Function
The NASDAQ is presently considering a rule change that will require its listed companies to establish and maintain an Internal Audit Function (IAF). Similarly, the New York Stock Exchange (NYSE) listing rules mandate the presence of an IAF (NYSE Section 303A.07).
However, the NYSE does not address the effectiveness of the IAF. While some coercive force can be an important factor that may help to bring the best out of Internal Audit, having an IAF is not the same as having a value-adding and effective IAF. The NASDAQ may consider demanding organizations to establish and maintain an effective IAF.
Academic research and more practitioner geared publications may provide helpful pointers what an effective IAF looks like.