Certified Internal Auditor (CIA) Practice Test

Which situation can contribute to a lack of independence within the internal audit activity?

1. The CEO's accusation against the new auditor

2. Majority of audit committee members from within the organization

3. The internal audit charter has not been approved

4. All of the above

The correct answer is: All of the above

A lack of independence within the internal audit activity can arise from various situations that compromise the objectivity and impartiality of the auditors. The first situation relates to the CEO's accusation against the new auditor. When a CEO makes an accusation, it can create a hostile environment for the auditor, potentially influencing their actions and judgment. This can lead to self-censorship or fear of repercussions, ultimately damaging their ability to conduct audits objectively. The second situation involves having a majority of audit committee members from within the organization. When the audit committee is composed predominantly of internal members, there can be a perceived or actual lack of independence. This is because these members might have loyalties or biases towards management, which can impair the committee's ability to support the internal audit function effectively and challenge management when necessary. The third situation pertains to the internal audit charter not being approved. The charter serves to define the purpose, authority, and responsibility of the internal audit activity. Without an approved charter, the internal audit does not have a clear mandate or established framework to operate within, which can lead to ambiguities regarding its independence and authority. Each of these situations can contribute to a compromised independence of the internal audit activity, making it crucial for organizations to address them to ensure the