Final answer:
Internal auditor workpapers are primarily prepared for the internal audit activity to support the audit's findings and ensure professional standards are met. They serve as an integral documentation tool and facilitate the internal audit process, impacting the reliability of audits and corporate governance.
Step-by-step explanation:
The internal auditor prepares workpapers primarily for the benefit of the internal audit activity. Workpapers provide documentation of the auditor's work and serve as a record of the evidence gathered, the procedures performed, the conclusions reached, and the recommendations made during an audit engagement.
They are an integral part of the audit process as they support the audit's findings and demonstrate adherence to professional standards.
The intended audience of the workpapers, which can be the internal audit team, senior management, external auditors, or even the engagement client, may affect the reliability of the document.
The primary purpose, however, is to ensure the internal audit activity has a complete, accurate, and robust basis for its reports and to facilitate the planning, performance, and supervision of the audit.
Ineffective corporate governance, such as in the case of Lehman Brothers, highlights the importance of accurate and reliable documentation in upholding the trust of shareholders and external investors.
The board of directors, audit firms, and outside investors depend on transparent and correct financial information to make informed decisions. Therefore, the accuracy and integrity of workpapers are crucial for internal and external audits, risk management, and corporate governance.