Question

Which of the following would be considered in determining whether an internal audit department is independent?

a.The organizational level of the chief audit officer and the objectivity of the audit staff
b.A requirement for the auditors to report to the audit committee and the composition of the audit committee
c.The organizational status of the audit committee and the individual independence of internal auditors in the department
d.The nature of the audit charter and the objectivity of the audit staff

Answer 1

The independence of an internal audit department is determined by the organizational level and objectivity of the audit staff, the requirement for auditors to report to an audit committee, the status of the committee, and the nature of the audit charter.

Step-by-step explanation:

Determining whether an internal audit department is independent involves various factors.

• The organizational level of the chief audit officer and the objectivity of the audit staff can indicate independence by showing that the internal auditors have sufficient authority and are not unduly influenced by management.
• A requirement for the auditors to report to the audit committee and the composition of the audit committee itself can also reveal independence, as it points to a structure where the internal audit department is accountable to those with governance responsibilities, not to those potentially subject to audit.
• The organizational status of the audit committee and the individual independence of internal auditors in the department may suggest the absence of conflicts of interest and a culture that promotes unbiased auditing.
• Lastly, the nature of the audit charter and the objectivity of the audit staff can provide a framework that supports independent operation and clear guidelines for maintaining independence and objectivity within the audit process.