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Question 598 - IIA-CIA-Part1 discussion

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In a small company with a small budget, the board and senior management asked the chief audit executive (CAE) to develop specific controls prompted by a new regulatory requirement affecting a specific process. The CAE was also directed to report functionally to senior management. An audit engagement on this process was already set in the internal audit plan. Which of the following represents an impairment to the internal audit activity's independence?

A.

The development of controls by the CAE.

Answers
A.

The development of controls by the CAE.

B.

The audit engagement regarding this process.

Answers
B.

The audit engagement regarding this process.

C.

The functional reporting of the CAE to senior management.

Answers
C.

The functional reporting of the CAE to senior management.

D.

The small budget.

Answers
D.

The small budget.

Suggested answer: A

Explanation:

The internal audit activity's independence is impaired if the chief audit executive (CAE) is involved in developing controls, as this constitutes a management function. According to IIA standards, internal auditors must remain independent and objective, avoiding roles that involve direct management responsibilities. Developing specific controls prompted by a new regulatory requirement blurs the lines between management and audit functions, impairing the ability of the internal audit activity to later provide an objective assessment of those controls.

IIA Standard 1112: Chief Audit Executive Roles Beyond Internal Auditing

IIA Standard 1100: Independence and Objectivity

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asked 03/11/2024
RYAN UBANA
39 questions
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