CIA 1.5: Internal Audit Ethics - Objectivity

Question 1

Internal auditors shall:

Answer 1

2. 1. Shall not participate in any activity or relationship that may impair or be presumed to impair their unbiased assessment. This participation includes those activities or relationships that may be in conflict with the interests of the organization.
3. 2. Shall not accept anything that may impair or be presumed to impair their professional judgment.
4. 3. Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review.

Question 2

Why is material ownership of a competitor allowed by Internal Auditors?

Answer 2

An internal auditor seldom can during the course of employment take action to enhance the value of the ownership interest.

Question 3

If management override of an important control creates exposure to a material risk, what is the Internal Auditor’s responsibility?

Answer 3

the internal auditor is ethically obligated to report the matter to senior officials charged with performing the governance function. Disclosure is not limited by time constraints.

Question 4

Can an Internal Auditor assure anonymity?

Answer 4

An internal auditor cannot assure anonymity. Information communicated to an internal auditor is not deemed to be privileged. However, promising merely to attempt to keep the source of the information confidential is allowed.

Question 5

If an internal auditor gathers enough information to dispel the suspicion of fraud, is disclosure required?

Answer 5

No

Question 6

What should CAE do in terms of sharing information?

Answer 6

The CAE should share information and coordinate activities with other internal and external providers of relevant assurance and consulting services.

Question 7

What does a conflict of interest policy prohibit?

Answer 7

A conflict of interest policy should prohibit the transfer of benefits between an employee and those with whom the organization deals.

Question 8

Violations of rule of conduct 2.1:

Answer 8

1. Excessive individual fraternizing outside of work with the organization’s employees, management, third-party suppliers, and vendors.
2. Certain dealings in commercial properties (excluding rental activity).
3. Sales of services or products by the internal auditor to the organization.
4. Participation in non-public service organizations may not be allowed, for example, serving as a consultant to third parties (vendors, suppliers, etc.) with which the organization conducts business.
5. Performing an audit in a department managed by a family member.
6. Accepting a bonus based on work accomplished during an audit.
7. Assuming management responsibilities and auditing an area in which the auditor had such responsibilities within 1 year.

Question 9

Violations of rule of conduct 2.2:

Answer 9

1. Accepting gifts, meals, trips, and special treatment that exceed policy limits or are not disclosed and approved
2. Working in a non-audit position and accepting gifts not permitted by IIA code of conduct

Question 10

Violations of rule of conduct 2.3:

Answer 10

1. Intentional omission of disclosures of illegal activity from final engagement communications
2. Withholding pertinent information
3. Not communicating pertinent information to the chief audit executive
4. Distorting facts reported in final engagement communications

Question 11

How do you demonstrate conformance with objectivity?

Answer 11

“[T]he CAE may provide evidence of relevant policies and procedures for the internal audit activity, the requirement for internal auditors to attend meetings or trainings about objectivity, and documentation of the rationale for allocating resources to the internal audit plan, including consideration of potential impairments.”

“Additional evidence may include documentation of research into potential conflicts of interest related to outsourced and cosourced activities for which the CAE has responsibility, as well as signed contracts and records of services provided with the rationale and evidence supporting results, observations, and conclusions.”

“Engagement workpapers that have been approved by the CAE or a designated engagement supervisor may evidence that internal auditors have conducted a balanced assessment. Feedback from post-engagement surveys and supervisory reviews of engagements may provide additional evidence that the internal auditors’ work appeared to be performed objectively. Assessments as part of the internal audit activity’s quality assurance and improvement program also lend support that appropriate objectivity was used in arriving at internal audit conclusions and opinions.”