Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 101

In which of the following situations would the organizational independence of an internal audit activity be impaired?

Answer options

• 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.

Correct answer: C

Explanation

The correct answer is C because providing assurance services for an area where the engagement supervisor had previous oversight creates a conflict of interest, impairing the independence of the internal audit. Options A and D do not necessarily compromise independence as they involve reporting structures or compensation, while option B relates to limitations on the scope of work rather than the independence of the audit function itself.