The cost of installing and maintaining the department is high, in particular for large companies, as they may need to employ qualified accountants to manage their activities. In small companies, the department may not be justifiable.
The management may ignore reports or recommendations by this department thus:
- Frustrating efforts of the department and this may lead to apathy in the internal auditing function and thus inefficiencies.
- This may lead to errors and frauds left undetected due to the frustration mentioned above.
- Other departments which it is supposed to appraise may ignore it and this may lead to inability to undertake independent appraisal.
Lack of recognition by the management:
Top management may not utilise the department for purposes for which it was intended either by not taking its recommendations seriously or by not according it a chance to undertake serious appraisals of their activities.
The following may cause apathy:
The department is keen on pointing out problems without giving out solutions.It concentrates on a specific department without giving attention to other departments.If it intimidates other departments.
The management may deny IA function its due independence and this may lead to:
Requiring the internal audit function to carry out accounting duties such recording of transactions or performing control duties such as preparing bank reconciliation statements.The department may be over relied on by the management who may reduce managerial reviews and controls. This may frustrate the objectives of departments, leading to inefficiencies, misuse of assets, errors and frauds and lack of co-ordination of the company’s activities.