Question

In which of the following situations does an internal auditor potentially lack objectivity?

Select one:
a. A payroll accounting employee assists an internal auditor in verifying the physical inventory of small motors.
b. An internal auditor discusses a significant issue with the vice president to whom the auditee reports prior to drafting the audit report.
c. An internal auditor recommends standards of control and performance measures for a contract with a service organization for the processing of payroll and employee benefits.
d. A former purchasing assistant performs a review of internal control over purchasing four months after being transferred to the internal audit department.

Answer 1

An internal auditor may potentially lack objectivity in situation d, where a former purchasing assistant performs a review of internal control over purchasing shortly after being transferred to the internal audit department, due to potential conflicts of interest or biases. correct option is D

Step-by-step explanation:

The question refers to scenarios in which an internal auditor may lack objectivity. Objectivity is crucial in the auditing process as it allows the auditor to report on the financial statements without biases or conflicts of interest, ensuring credibility and trust in the financial reporting process. Among the options provided, the situation where the internal auditor's objectivity is potentially compromised is:

d. A former purchasing assistant performs a review of internal control over purchasing four months after being transferred to the internal audit department.

The reason this situation poses a threat to objectivity is due to the potential for conflict of interest or bias, as the auditor was recently involved in the area they are now auditing. The internal auditor may still have relationships with the personnel in the purchasing department or may unconsciously be influenced by their past experiences, hindering their impartiality in the audit process.