When the Chief Audit Executive (CAE) reports to the Chief Financial Officer (CFO), there is a potential risk of impairing the independence and objectivity of the internal audit function. This reporting relationship might limit the scope of audit engagements, especially in areas that could affect the CFO, such as financial reporting or other areas directly under the CFO's control. The CAE should ideally report functionally to the board or audit committee to maintain independence, as suggested by The IIA standards.References:
* IIA Standard 1110: "Organizational Independence"

Section: Volume A

An organization can conclude that the established organizational governance framework was correctly implemented when the internal auditor evaluation shows its soundness. The evaluation by the internal auditor provides an independent and objective assessment of whether the governance framework is functioning as intended and meeting the organization's objectives.References: The IIA's standards on governance, which outline the role of internal auditing in evaluating the effectiveness of governance frameworks.