Why group of small companies should set up internal audit department?

I have worked in many local companies in Cambodia and some of those have audit department and some doesn't have.

Some of the group companies installed internal audit departments which is under the Board of Directors and some of them install internal audit department under finance departments.

It quite simple that the public limited companies are required to set up internal audit department under audit committee and board as  it is required by law and best practices. However, the limited company might not required.

How about limited companies which is not require by to set up internal audit department?

In some country, the limited companies are not required to set up internal audit department as set up internal audit department will cost a lot of money. In Cambodia, there are many limited companies which have their subsidiary and the major decision centralize at the group or  management team in the group. 

The group companies might have a lot of work to do and normally they do not have enough time to ensure that all the decision have been follow by its subsidiary. They know the process, policy, or decision that deploy by group companies does not implement unlit the problem raise, or the fraud occur.

To me, installing the small internal audit department which is report to controlling department that control the subsidiary is really importance and its might help the management team in the group company take nape peacefully. 

By theories, internal audit department should not report to finance, CEO or other operating department since its might be conflict with the operation. The reporting line should be BOD or audit committee. The main reason is because of BOD and audit committee is the one who control the executive department like CEO. If the reporting line is to CEO then there will be conflict.

For the group of limited companies do not required audit department, do not have BOD and audit committee, the best way to make sure all of the policies, procedure, operating effectiveness, and fraud that occur in subsidiary companies, small audit team at the group companies should be setting up.