CIA Part 1 - Q10

10. Independence is most likely impaired by an internal auditor’s

a. Continuation on an engagement at a division for which (s)he will soon be responsible as the result of a

promotion.

b. Reduction of the scope of an engagement due to budget restrictions.

c. Participation on a task force that recommends standards for control of a new distribution system.

d. Review of a purchasing agent’s contract drafts prior to their execution.

10. Solution: a

a. Correct. When the IAA or individual internal auditor is responsible for, or management is considering assigning, an operation that it might audit, the internal auditor’s independence and objectivity may be impaired.

b. Incorrect. Budget restrictions do not constitute impairment of an engagement.

c. Incorrect. It is acceptable for the internal auditor to recommend standards of control, but the internal auditor is not able to design, install or draft procedures. These functions may impair the internal auditor’s objectivity.

d. Incorrect. It is acceptable for the internal auditor to review contracts prior to their execution.