Question

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

O a requirement for the auditors to report to the audit committee and for the composition of that committee.
O the organizational status of the audit committee and the individual independence of internal auditors in the department.
O the nature of the audit charter and the objectivity of the audit staff.
O the organizational level of the chief audit officer and the objectivity of the audit staff.

Answer 1

Determining the independence of an internal audit department involves examining the direct reporting relationship to the audit committee, the authority level of the chief audit officer, individual independence of auditors, and the nature of the audit charter.

Step-by-step explanation:

In determining the independence of an internal audit department, various factors are considered to ensure there is no impairment to the department's ability to perform its duties objectively. These factors include:

• The requirement for the auditors to report directly to the audit committee, which helps maintain independence from the management team being audited.
• The organizational status of the internal audit department, specifically the level to which the chief audit officer reports within the organization, emphasizing the importance of seniority and authority.
• The individual independence of internal auditors to ensure that personal biases do not influence audit results.
• The nature of the audit charter, which defines the scope and responsibilities of the audit department and supports objective operations.

While all these factors are relevant, the two options that stand out most in term of internal audit independence are:

1. The organizational level of the chief audit officer and the objectivity of the audit staff.
2. The nature of the audit charter and the objectivity of the audit staff.