Independence, Objectivity, and Ethics

Question 1

Independence

Answer 1

The freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner.

Question 2

Organizational independence exists if the CAE:

Answer 2

1. Reports functionally to the Board (audit committee)
2. Reports administratively to the CEO (or similar)

Question 3

CAE (access)

Answer 3

CAE has direct and unrestricted access to the Board and Senior Management.

Question 4

Report about organizational independence

Answer 4

Annual reporting on organizational independence to the Board.

Question 5

Interference (disclose)

Answer 5

Internal audit must be free from interference, or must disclose this to the Board.

Question 6

Internal audit must control without interference Management:

Answer 6

1. The scope of work
2. The performance of work
3. The reporting of results

Question 7

Objectivity (key indicator)
…. indicating internal auditors appear impartial and objective

Answer 7

Feedback from audit client surveys or interviews

Question 8

Key indicator (objectivity)
… acknowledging they are free from conflict of interest or disclosing any potential conflicts.

Answer 8

Internal auditors (and any assurance providers upon which they rely) have completed forms

Question 9

Objectivity (key indicator)
Trends in report/observation ratings show that internal auditors…

Answer 9

do not avoid negative/unsatisfactory ratings at engagement or observation levels.

Question 10

Objectivity (key indicator)
Conclusions and opinions show that internal auditors report…

Answer 10

known material facts.

Question 11

Objectivity (key indicator)
Conclusions and opinions show that internal auditors report…

Answer 11

known material facts.

Question 12

Objectivity (key indicator)
Assessments as part of the internal audit activity’s QAIP affirm that…

Answer 12

conclusions and opinions were arrived at objectively (are reliable and supported with facts)

Question 13

Independence (key indicator)
…. CAE performance and approves appointment, compensation and termination.

Answer 13

Board reviews

Question 14

Independence (key indicator)
Low number of inhibitors/restrictions to the…

Answer 14

scope of work that the internal audit department has experienced (e.g., access, major delays)

Question 15

Independence (key indicator)
Regularly scheduled private sessions (e.g., quarterly or at least annually) …

Answer 15

with board without management present.

Question 16

Professional skepticism helps internal auditors…

Answer 16

remain objective.

Question 17

Reported observations that are almost exclusively satisfactory provide a reason to suspect that internal auditors…

Answer 17

lack sufficient independence and may be under pressure to suppress unsatisfactory observations.