Consider the internal audit staffs of the following two companies:

Carl Company's internal auditors are college graduates who have been hired mostly from the ranks of marketing personnel who did not make sales quotas. They report to the controller of Carl Company. Their tasks include reconciling all cash accounts to the general ledger, reviewing all major contracts for compliance with relevant regulations, and reviewing control procedures for check-writing and other high-risk activities at the business-process level. Most of the auditors have been on the job for 2 years or fewer.

Ashley Company employs students from major accounting programs in its internal audit department. The manager of the internal audit group reports to the chairman of the audit committee of the board of directors. The auditors' tasks include the design, implementation and periodic review of major internal control systems; the frequent sampling and investigation of high-risk expenditures such as employee travel expense reports; and the reconciling of all cash accounts to the general ledger.

For each of these two companies, discuss the following:

a. How do the organizational positions and the competencies of the respective internal auditor staffs affect their reliability?

b. How relevant are the activities of the respective internal audit staffs to the external financial statement audit?

c. What roles could the internal auditors of these companies play in the financial statement audit?