Misunderstanding of Independence of Internal Auditor


Business School

It is very common for other staff to interpret “internal auditor’s independence” to mean isolation from all other staff and being member of committees in the institution. In fact some school of thought believes that when an internal auditor is on any committee he cannot turn back and review the policy decision made by such committee.

To the contrary, when the auditor is on such committees he has the first hand information of the policy and would fashion out a strategy to monitor those policies and report back to management whether they are working.

Independence is the freedom from conditions that threaten the ability of Internal Audit to carry out their responsibilities in an unbiased manner.  

The Internal Auditing standards interpret “independence” as freedom from conditions that threaten the ability of the internal audit activity or the chief audit executive to carry out internal audit responsibilities in an unbiased manner.

To achieve the degree of independence necessary to effectively carry out the responsibilities of the internal audit activity, the Chief Audit Executive has direct and unrestricted access to senior management and the board. This can be achieved through a dual-reporting relationship. 

The Chief Audit Executive must report to a level within the organization that allows the internal audit activity to fulfill its responsibilities. He should functionally report to the Audit Committee and administratively to the Vice – Chancellor. The Chief Audit Executive must confirm to the board, at least annually, the organizational independence of the internal audit activity. 

 

Finally the internal audit activity must be free from interference in determining the scope of internal auditing, performing work, and communicating results.


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