Question

An element of authority that should be included in the charter of the internal audit activity is

Select one:
a. Identification of the types of disclosures that should be made to the audit committee.
b. Identification of the organizational units where engagements are to be performed.
c. Access to records, personnel, and physical properties relevant to the performance of engagements.
d. Access to the external auditor's engagement records.

Answer 1

The charter of the internal audit activity should include the authority for internal auditors to have access to records, personnel, and physical properties to conduct thorough and effective audits.

Step-by-step explanation:

An element of authority that should be included in the charter of the internal audit activity is access to records, personnel, and physical properties relevant to the performance of engagements. This access is vital for the internal audit team to effectively perform their duty of assessing and assuring the company's operations, financial processes, and compliance with laws and regulations.

Without such authority, the effectiveness of the internal audit function could be significantly compromised, potentially leading to inadequate oversight and governance, much like what was observed in the case of Lehman Brothers, where corporate governance failed to provide investors with accurate financial information about the firm's operations.