Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 126

An internal auditor conducted a surprise inventory count at a warehouse of a small subsidiary. By the end of the count, it became apparent that a few items from several categories were missing. The warehouse manager explained that he took those items for personal needs, and he said that he would provide information about other employees' wrongdoings to avoid being reported. The auditor agreed not to report the issue, which ultimately enabled her to uncover more significant losses. Which of the following statements is true regarding this situation?

Answer options

• A. This scenario demonstrates an impairment to audit independence.
• B. The auditor acted in accordance with the Definition of Internal Auditing, adding value to the organization.
• C. The auditor demonstrated due professional care and cost-benefit considerations.
• D. The auditor appears to lack personal integrity.

Correct answer: A

Explanation

The correct answer is A, as the auditor's decision to overlook unethical behavior compromises her independence, which is essential for unbiased auditing. Options B and C are incorrect because the auditor's actions did not align with the principles of adding value or exercising due care. Option D, while potentially valid, does not directly address the core issue of compromised independence.