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  • Essay / Hollate Manufacturing Case Analysis - 721

    The oversight responsibilities of the board of directors, the lack of expertise or in-depth understanding of financial controls and responsibilities of the chief audit executive, and the functions of understaffed internal audit, lacking independence and direct access to the board of directors. contributed to the lack of internal controls. To begin with, the board of directors should be retrained to gain financial knowledge to review financial reports. In addition to attending formal meetings, the board should be more involved in management. For the audit committee, the two members who were recruited as Brennahan's acquaintances need to be replaced with experts who are more familiar with accounting rules beyond just "financial skills." Additionally, internal audit functions must grow with different expertise as the organization's activities expand, testing financial reporting rather than internal controls from an operational perspective. The head of internal audit should be more independent and proactive in executing audit plans, instead of following the orders of the CFO, and initiate direct and effective communication between internal audit and audit.