Question

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

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 controls over purchasing four months after being transferred to the internal audit department.

Answer 1

The internal auditor potentially lacks objectivity in the scenario where a former purchasing assistant performs a review of internal controls over purchasing soon after transferring to the internal audit department, due to possible conflict of interest.

Step-by-step explanation:

In the given scenarios, the situation where the internal auditor potentially lacks objectivity is: d. a former purchasing assistant performs a review of internal controls over purchasing four months after being transferred to the internal audit department. The reason for this is due to the potential conflict of interest and the auditor's recent involvement with the department being audited. As the auditor had a recent role in the purchasing department, their ability to be impartial could be compromised. They might have residual loyalty to their former colleagues or be influenced by their previous involvement in specific transactions.

It is critical for auditors to maintain objectivity to ensure the credibility of the audit process. Any potential conflict of interest should be avoided to preserve the integrity of the audit findings, which is essential for maintaining trust within the organization and amongst its stakeholders.