TIAPS Module 1 Audit and Assurance workbook

To establish individual objectivity requires that auditors have “an impartial, unbiased attitude
and avoid any conflict of interest.” This involves adhering to a code of ethics and
professional standards, maintaining professional competency, and applying due professional
care and professional skepticism. It also means auditors must be part of an independent
internal audit function.
The requirements for independence and objectivity are summarized below.
Requirements for the Independence of
the Internal Audit Function
• Internal audit mandate (as defined in
charter or legislation).
• Access to necessary people, resources,
and information.
• Freedom from interference.
• Functional reporting by head of internal
audit to an appropriate level in
organization (ideally governing body).
• Administrative reporting to senior
management (ideally CEO).
• Application of safeguards for
independence when threatened.
Requirements for the Objectivity of
Internal Auditors
• Independence of internal audit function.
• Freedom from conflicts of interest.
• Competency.
• Objective mindset.
• Professional skepticism.
• Due professional care.
• Unwavering integrity.
• Adherence to professional standards.
• Application of disciplined and
systematic procedures.
The internal audit mandate and charter are discussed in B.2. Independence and objectivity –
including the appearance of independence and objectivity – are important for the credibility
and authority of the internal audit function and of individual auditors. It should be clear to
internal and external stakeholders that the opinion of the internal audit function is reliable
and has not been concocted to suit the personal interests of auditors, managers, or
members of the governing body. Internal audit provides transparency through an unbiased
and insightful assessment of past, current, and future circumstances. This enables:
• Managers to make well-informed decisions.
• Members of the governing body to exercise oversight and intervene where
necessary.
• External stakeholders to trust in reports regarding the organization’s performance,
position, and prospects and so hold managers and leaders to account.
If the internal audit function is not sufficiently independent of management, it becomes
indistinguishable from a second line unit. In this capacity it can provide value but is robbed of
its distinct characteristic. Its authority is subordinated to senior management and its scope
and capacity potentially limited. The findings and recommendations of auditors whose
objectivity is or appears to be impaired can be disregarded or dismissed more easily. Trust is
established on the basis that internal auditors operating outside of the management
structure, and there is confidence their recommendations are made in the best interests of
the organization.
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