CIA Part 1 - Q20

20. Independence from outside pressure is an important factor for the internal audit activity (IAA) to work freely and objectively. Which of the following contributes to the internal auditor’s independence?

a. Management should assist the IAA by reviewing, revising and forwarding engagement communications to the audit committee.

b. The IAA reports directly to the audit committee, without corroborating engagement communications with management.

c. Ideally, the IAA functionally reports to the audit committee but reports to the chief operating officer on all engagements relating to operations.

d. The accuracy of the engagement communications should be verified with management, and the IAA should then report to management and the audit committee.

20. Solution: d

a. Incorrect. Engagement communications would go direct to the audit committee, not forwarded by management.

b. Incorrect. Engagements communications should also be communicated with management.

c. Incorrect. Ideally, the CAE would administratively report to the CEO or high enough officer to maintain independence, and functionally to the audit committee or some other appropriate governing board. Under the ideal situation, all engagement communications are sent to the audit committee as well.

d. Correct. Internal auditors should first discuss conclusions and recommendations with management so management is able to verify the accuracy of the engagement communications. Final engagement communications would then be sent to the audit committee.