Certified Internal Auditor (CIA) Part 1: Business Acumen — Question 189

An organization is considering purchasing a new banking software system and has asked the internal audit activity to evaluate the system. An internal auditor assigned to perform the engagement worked at the software company two years ago and is familiar with the system’s design strengths and weaknesses. Which of the following is true regarding impairment to the auditor’s objectivity?

Answer options

• A. This situation does not necessitate any action related to the auditor’s objectivity.
• B. The auditor should decline to perform the audit because personal conflicts of interest are likely.
• C. The auditor must disclose to the chief audit executive that this situation may impair her objectivity.
• D. The auditor can provide only consulting services, not assurance.

Correct answer: C

Explanation

The correct answer is C because the auditor is required to disclose any situation that may affect their objectivity to the chief audit executive. Option A is incorrect as action is necessary due to the potential for bias. Option B is also wrong because it may not be necessary to decline the audit outright, and option D is inaccurate since the auditor can still perform assurance services with proper disclosures.