In which of the following situations would the organizational independence of an internal audit activity be impaired?
A.
The chief audit executive reports administratively to the CEO.
B.
Scope limitations are imposed on internal audits.
C.
The internal audit activity provides assurance services for an activity for which the engagement supervisor had responsibility within the previous year.
D.
The compensation committee of the board approves the remuneration of the chief audit executive.
The organizational independence of an internal audit activity is considered impaired if there are scope limitations imposed on internal audits. Such limitations prevent the internal audit activity from fully evaluating and reporting on risk management, control, or governance processes within the organization, thus hindering the ability to perform work freely and objectively. Administrative reporting lines (such as to the CEO), the process of compensation approval, or assurance services provided for previous responsibilities do not inherently impair independence unless they lead to restrictions on audit scope or influence over audit findings.
IIA Standards and guidance on independence and objectivity.
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