Final answer:
The requirement that an internal auditor's workpapers support their findings serves to facilitate quality assurance reviews and allows the audit committee to understand the work done. It also supports the internal audit's overall activity by providing a basis for resource allocation and maintaining audit integrity.
Step-by-step explanation:
The requirement that an internal auditor's workpapers should support the observations, conclusions, and recommendations to be communicated serves multiple purposes. One key purpose is to facilitate quality assurance reviews. Such reviews ensure that the audit work meets certain standards and provides a basis for the findings and recommendations presented. This also allows these findings to be reproducible and verifiable by others, such as the audit committee, which may review the workpapers to understand the basis for the auditor's conclusions. Moreover, well-documented workpapers help in ensuring the continuity and consistency of the audit process over time.
Effective reporting in an internal audit entails developing ideas systematically and integrating evidence from the gathered data. This helps in supporting the internal audit activity and justifying the resources and budget allocated to it. The workpapers serve as a record that holds the auditor accountable for the observations made and the conclusions drawn, thereby underpinning the overall integrity of the audit function.