2. Independence, Objectivity, Proficiency, Care and Quality (40% 50 MCQs) Flashcards
Section A – Basic
Organizational Independence (Importance & functional reporting etc.)
Attribute Standard 1100 - Independence & Objectivity
Independence (IA attribute)
list 4
- Independence: freedom from threats to carry out internal audit activity & Report any bias or interference to the Board.
- Access: CAE access to Board and CEO
- Reporting: CAE reports to both the Audit Committee and senior management.
- Annual Check: CAE must confirm the audit’s independence to the Board each year.
Section A – Basic
Organizational Independence (Importance & functional reporting etc.)
Dual Reporting: Functional to Board & Administrative to CEO
Functional Reporting (Attribute Standard 1110 - Org Independence)
Independence (IA attribute)
list 10
Board approves;
1. Internal Audit Charter (IA Charter)
2. Risk Based Internal Audit Plan
3. Budget & Resource Plan
4. Performance Appraisal
5. Appointment and Removal of CAE
6. Remuneration
7. Scope Limitation
8. Inquiries about Management
Section A – Basic
Organizational Independence (Importance & functional reporting etc.)
Dual Reporting: Functional to Board & Administrative to CEO
Administrative Reporting
Independence (IAD attribute)
list 1
Report to CEO
Section B – Basic
Impairment of Internal Audit Independence (Identify)
Attribute Standard 1110 - Conformance
Independence (IAD attribute)
- AC and IA Charter – Describe AC oversight duties
- CAE JD and Performance Evaluation – Note reporting relationship and supervisory oversight
- IA Policies – Addresses independence, board reporting reflecting in org chart
Section B – Basic
Impairment of Internal Audit Independence (Identify)
Attribute Standard 1111- Conformance
Independence (IAD attribute)
Board meetings agendas and minutes demonstrate CAE direct interaction with Board/AC.
Section C - Proficient
Individual Auditor’s Impairment (Identify)
Attribute Standard 1100
Objectivity (IA attribute)
Objectivity is
- impartial
- unbiased mindset
- avoid conflict of interest (CoI)
Threats to objectivity must be managed at
- internal auditor
- engagement
- functional
- organizational level.
check again this note.
Section C - Proficient
Individual Auditor’s Impairment (Identify)
Attribute Standard 1120
Objectivity (IA attribute)
- Conflict of Interest (CoI) – not in the best interest of the org and prejudice in performing duties.
- CoI exists even if no unethical or improper act results.
- IA Policies shall demonstrate expectation and requirement for unbiased mindset.
Section C - Proficient
Individual Auditor’s Impairment (Identify)
Attribute Standard 1130 - Impairment of Independence & Objectivity
Objectivity (IA attribute)
list 9
- Personal CoI
- Scope limitation
- Restriction to access records or personnel or property
- Resource limitation (such as funding)
- Self-review
- Self-interest
- Familiarity
- Bias
- Undue Influence
Section D - Proficient
Policies to Promote Objectivity (Analyze)
Attribute Standard 1300 - Independence issue led to Objectivity Impairment
Objectivity (IA attribute)
list 4
- CAE broader responsibility
- Auditor Supervisor broader responsibility
- No direct communication with Board
- Budget is reduced
check again this note
Section D - Proficient
Policies to Promote Objectivity (Analyze)
Attribute Standard 1300 - Reporting
Objectivity (IA attribute)
Real Impairment
Impairment is real:
- Discuss with the Board and senior management.
- Report in writing to Board & its likely impact on overall engagement.
- Seek support to resolve the impairment issue.
- if potential impairment, made disclosure before acceptance of engagement.
- Specific Impairment
1. Impairment by Prev Assignment
2. Impairment by non audit assignment
3. Impairment by consulting assignment
Section D - Proficient
Policies to Promote Objectivity (Analyze)
Attribute Standard 1300 - Reporting
Objectivity (IA attribute)
Not Real Impairment
Impairment is not real:
- Discuss concern with management.
- Plan and document engagement meetings.
- Explain the issue and make disclosures in the report.
Section D - Proficient
Policies to Promote Objectivity (Analyze)
Attribute Standard 1300 - Scope Limitation
Objectivity (IA attribute)
Restriction place on internal audit activity
Reporting
Section A - Basic
IA Knowledge, Skills & Competence (In-house or Acquire)
Attribute Standard 1200 - Auditor Proficiency
Proficiency & Competence
Proficiency
* a collective term.
* Refers to overall IA knowledge, skills, and competencies.
Competence
- ability to perform job properly based on knowledge, skill & behaviour.
Section A - Basic
IA Knowledge, Skills & Competence (In-house or Acquire)
Attribute Standard 1200 - Auditor Proficiency
Proficiency & Competence
5 points
- Proficiency gained through experience, CPD, and certifications.
- Engagements must be conducted with professional care.
- Internal auditors must ensure proficiency.
- Proficiency depends on having necessary competencies.
- CAE may decline engagements if skills are lacking.
Section A - Basic
IA Knowledge, Skills & Competence (In-house or Acquire)
Attribute Standard 1200 - Competency Framework
Proficiency & Competence
list 10
- Professional Ethics
- IA management
- IPPF
- Governance, Risk & Controls
- Business Acumen
- Communication
- Persuasion and Collaboration
- Critical Thinking
- IA delivery
- Improvement & Innovation
Section B - Proficient
Technical Skills & Soft Skills
IA Resources - Internal
IA Resources
list 5
- CAE reviews skills annually.
- Conduct staff performance reviews.
- Ensure CPDs are completed.
- Record IA background info (skills, projects, training needs).
- Outsource or co-source audits if in-house expertise is lacking.
Section B - Proficient
Technical Skills & Soft Skills
IA Resources - External
IA Resources
list 5
- IA can outsource all audit activities.
- Oversight remains with the organization.
- Audits must follow IPPF standards.
- Engagement clients are unacceptable.
- External sources may include audit firms, consultancies, or universities.
Section C - Proficient
Due Professional Care
Due Professional Care & CPD
- Reasonably prudent & competent IA,
- reasonable care not absolute care,
- conformance with IIA Code of Ethics & IPPF,
- IA SOP are systematically provide disciplined approach.
Section C - Proficient
Due Professional Care
Attribute Standard 1220 A1 vs Attribute Standard 1220 C1 - Due Professional Care
Due Professional Care & CPD
Assurance Engagement:
- Assess extent of work needed.
- Consider risk maturity and organizational governance.
- Perform cost-benefit analysis and evaluate error, fraud, or noncompliance risks.
- Utilize technology and data analytics tools.
Consultancy Engagement:
- Understand client needs and expectations.
- Evaluate work complexity.
- Conduct cost-benefit analysis.
Section D - Proficient
CPD’sw
Due Professional Care & CPD
list 9
Auditor can use
1. self-assessment tools (competency framework)
2. on job training
3. coaching
4. mentoring
5. external training
6. conference
7. seminar
8. research
9. study plan
(Practicing CIA - 40 hrs and Non-practicing 20 hrs of CPDs annually)
Section A - Basic
QA (Internal & External Assessment)
Internal Assessment
Quality Assurance & Improvement Program (QAIP)
- Ongoing: Assess engagement level, planning, supervision, working papers, reports, reviews, KPIs, and feedback.
- Periodic: Review by Senior Auditor or CIA, conformance with standards and code of ethics.
- Reporting: CAE reports results to Board and Management.
Section A - Basic
QA (Internal & External Assessment)
External Assessment
Quality Assurance & Improvement Program (QAIP)
- Frequency: Every 5 years.
- Assessors: Qualified Independent Assessor or team.
- CAE Duties: Discuss form, frequency, and assessor independence with the Board.
- Assessment Approaches:
* Full External Assessment.
* Self-Assessment with Independent External Validation (SAIV).
Section A - Basic
QA (Internal & External Assessment)
External Assessment
Quality Assurance & Improvement Program (QAIP)
- Assessor Competence: Must be knowledgeable in IPPF and quality assessment processes.
- Conflict of Interest: Assessors must avoid conflicts, including connections to the organization.
- Peer Review: Conducted by unrelated organizations.
- Validation: May involve one or more independent individuals.
Section B - Basic
QA Results (Board / Governing Body)
Reporting of QAIP
Quality Assurance & Improvement Program (QAIP)
- CAE must develop and oversee QAIP.
- Encourage Board oversight.
- QAIP applies to both assurance and consulting engagements.
- Conduct internal, ongoing, and external assessments.
- QAIP components: assessments, result communication, conformance disclosures.
- KPIs: audit plan completion, cycle time, accepted recommendations, customer satisfaction.
- CAE must understand IPPF elements.
- Periodically evaluate and update QAIP.
- External review every 5 years.
Section B - Basic
QA Results (Board / Governing Body)
Reporting of QAIP
Quality Assurance & Improvement Program (QAIP)
- apply to both assurance & consulting engagement
- Shall be ongoing, internal periodic & external assessment.
- QAIP consist of 5 compenents;
1. internal
2. external assessment
3. communication of results
4. conformance (generally and partially conforms)
5. non-conformance (does not conforms) disclosures - External assessment - every 5 years
- CAE should encourage Board oversight in QAIP
Section C - Basic
IPPF (Conformance vs. Nonconformance)
Deming Cycle
Quality Assurance & Improvement Program (QAIP)
CAE Use Deming Cycle:
1. Plan – Establish standards
2. Do – Establish process
3. Check – Compare actual results
4. Act – Provide feedback
