2-Independence, Objectivity, Proficiency, Care and Quality Flashcards
How frequently must the chief audit executive confirm to the board the organizational independence of the internal audit activity?
At least annually.
The organizational independence of the internal audit activity is achieved when it reports (1) ______ to the board and (2) ______ to senior management.
Functionally
Administratively
Independence is an attribute of ______.
The internal audit activity.
Objectivity is an attribute of ______.
Individual internal auditors.
Define the objectivity of an internal auditor.
Objectivity refers to an internal auditor’s impartial and unbiased mindset, which is facilitated by avoiding conflicts of interest.
What can be used to describe the expectation and requirements for the objectivity of internal auditors?
An internal audit policy manual or handbook.
The chief audit executive must establish (1) _____ and (2) _____ to assess the objectivity of individual internal auditors.
1-Policies
2-Procedures
Who is responsible for maintaining the objectivity of internal auditors?
The responsibility to maintain objectivity rests with the chief audit executive (CAE) and with internal auditors themselves.
Independence and objectivity may be impaired in _____ (1) or _____ (2).
1-Fact
2-Appearance
List examples of impairments to organizational independence and individual objectivity.
Personal conflict of interest
Scope limitations
Restrictions on access to records, personnel, and properties
Resource limitations
Define scope limitation.
A scope limitation is a restriction placed on the internal audit activity that precludes the activity from accomplishing its objectives and plans.
How should the chief audit executive (CAE) respond when an impairment to independence and objectivity is discovered after an audit has been executed?
The CAE should discuss the impairment with operating and senior management, as well as the board.
Assurance engagements for functions over which the chief audit executive has responsibility must be overseen by _______________.
A party outside the internal audit activity.
May the internal audit activity provide assurance services where it had previously performed consulting services?
The internal audit activity may provide assurance services where it had previously performed consulting services, provided the nature of the consulting did not impair objectivity and provided individual objectivity is managed when assigning resources to the engagement.
When may internal auditors provide assurance or consulting services relating to operations for which they had previous responsibilities without impairing objectivity?
Type of service When may internal auditors provide services (without impairment)?
Assurance 1 year after the previous responsibility
Consulting Any time
How should internal auditors respond when there are potential impairments to independence or objectivity relating to proposed consulting services?
Disclosure must be made to the engagement client prior to accepting the engagement.
Who is responsible for ensuring conformance with the Standards regarding internal auditor proficiency and due professional care?
The chief audit executive (CAE).
Who is responsible for performing engagements with proficiency and due professional care?
Every internal auditor.
Should each internal auditor individually be proficient in all necessary competencies of the internal audit activity?
No. The internal audit activity collectively, not each auditor individually, must be proficient in all necessary competencies.
List the 10 core competencies included in The IIA’s Global Internal Audit Competency Framework.
1-Professional ethics 2-Internal audit management 3-International Professional Practices Framework (IPPF) 4-Governance, risk and control 5-Business acumen 6-Communication 7-Persuasion and collaboration 8-Critical thinking 9-Internal audit delivery 10-Improvement and innovation
Which aspects of the internal audit activity cannot be outsourced?
Oversight of and responsibility for the internal audit activity must not be outsourced.
Internal auditors must apply the care and skill expected of a __________ internal auditor.
Reasonably prudent and competent.
List the areas that should be considered when internal auditors are exercising due professional care in assurance engagements.
Extent of work needed to achieve the engagement’s objectives
Relative complexity, materiality, or significance of matters to which assurance procedures are applied
Adequacy and effectiveness of governance, risk management, and control processes
Probability of significant errors, fraud, or noncompliance
Cost of assurance in relation to potential benefits
List the areas that should be considered when internal auditors are exercising due professional care in consulting engagements.
Needs and expectations of clients, including the nature, timing, and communication of engagement results
Relative complexity and extent of work needed to achieve the engagement’s objectives
Cost of the consulting engagement in relation to potential benefits
How many hours of continuing professional education (CPE) must certified internal auditors (CIAs) complete annually?
Types of CIAs Annual Hours
Practicing CIA 40 hours (at least 2 hours of ethics training)
Nonpracticing CIA 20 hours (at least 2 hours of ethics training)
The __________ must develop and maintain a quality assurance and improvement program that covers all aspects of the internal audit activity.
Chief audit executive.
List the five components of a Quality Assurance and Improvement Program (QAIP).
Internal assessments External assessments Communication of QAIP results Proper use of a conformance statement Disclosure of nonconformance
What are the two types of internal assessment in a Quality Assurance and Improvement Program (QAIP)?
Ongoing monitoring
Periodic self-assessments
What should be the frequency of external assessments in a Quality Assurance and Improvement Program (QAIP)?
At least once every five years.
When can a self-assessment be performed in lieu of a full external assessment in a Quality Assurance and Improvement Program (QAIP)?
When it is validated by a qualified, independent, competent, and professional external assessor
What are the four steps of the Deming Cycle?
Plan
Do
Check
Act
Ongoing monitoring is generally focused on reviews conducted at the ______________ level.
Engagement.
What two aspects of external assessments must the chief audit executive (CAE) discuss with the board?
The form and frequency of external assessments
The qualifications and independence of the external assessor or assessment team, including any potential conflict of interest
To whom must the chief audit executive communicate the results of the Quality Assurance and Improvement Program (QAIP)?
Senior management and the board
The results of the Quality Assurance and Improvement Program (QAIP) should include ___________.
The scope and frequency of both the internal and external assessments
The qualifications and independence of the assessor(s) or assessment team, including potential conflicts of interest
Conclusions of assessors
Corrective action plans
How frequently must the results of (1) external assessments, (2) periodic internal assessments, and (3) ongoing monitoring be communicated?
Type of assessment Frequency
External assessments Upon completion
Periodic internal assessments Upon completion
Ongoing monitoring At least annually
When nonconformance with the Code of Ethics or the Standards impacts the overall scope or operation of the internal audit activity, the chief audit executive must disclose the nonconformance and the impact to _______________.
Senior management and the board.
