Which of the following scenarios would most likely impair the internal audit function’s independence?
A.
An internal auditor assisted external auditors with a review of the payables department. The auditor worked in the payables department a little over a year ago.
B.
The chief audit executive had responsibility for the risk management function and helped coordinate an audit of that area by a third-party consultant.
C.
The chief audit executive was urged by the chief financial officer to scale down an accounts payable audit due to limited funds to cover audit costs.
D.
A new internal auditor was part of a team reviewing an area for which she was responsible less than a year ago. The advisory engagement was requested by management.
Pressure from the chief financial officer to reduce the scope of an accounts payable audit represents management interference with internal audit’s ability to determine engagement scope and perform necessary procedures. Organizational independence requires the internal audit function to operate without undue influence over scope, performance of work, or communication of results. Option A primarily concerns individual objectivity and is mitigated by the time elapsed and the nature of the external audit assistance. Option B demonstrates an appropriate safeguard because an independent third-party consultant performs the review of an area previously overseen by the CAE. Option D involves an advisory engagement, where prior operational responsibility does not create the same prohibition applicable to assurance services. Therefore, management pressure to scale down audit work presents the clearest independence impairment.
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