Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 135

Which of the following situations undermines the independence of the internal audit activity?

Answer options

• A. The internal audit activity is responsible for the company's risk management function, and its head manager reports to the chief audit executive.
• B. A senior member of the internal audit activity once worked in the corporate finance department.
• C. The organization's CEO reviews the internal audit activity's annual budget per the organization's policies and procedures.
• D. The internal audit activity often uses management's risk profile to build its own risk profile for annual planning.

Correct answer: A

Explanation

Option A is correct because having the internal audit activity manage risk and report to the chief audit executive creates a conflict of interest, jeopardizing its independence. Options B, C, and D do not inherently compromise independence; past roles, budget reviews, and utilizing management's risk profile can occur without undermining the function's autonomy.