Independence & Objectivity of
Internal Auditors
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ICPAK – ANNUAL INTERNAL AUDIT SEMINAR
MOMBASA CONTINENTAL HOTEL
2 0 TH- 2 2 ND A U G U S T , 2 0 1 4
JACK K. WASONGA
Wednesday, March 23, 2016
Agenda
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 Purpose, Authority & Responsibility
 Definition of Independence & Objectivity
 Organizational Independence
 Individual Independence of Internal Auditor
 Individual Objectivity of Internal Auditor
 Impairment to Independence/Objectivity
 Q&A
Wednesday, March 23, 2016
Independence & Objectivity
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“Internal Audit………the coolest profession in the
world”
Tom Peters (IIA 2013 Conference)
Wednesday, March 23, 2016
Purpose, Authority & Responsibility
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 Internal audit function draws its purpose, authority
and responsibility from the Internal Audit Charter
(PA – 1000-1).
 The charter establishes the IA activity’s position
within the organization.
 Final approval of the charter resides with the board
Wednesday, March 23, 2016
Definition of Independence & Objectivity
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 Independence is the freedom from conditions that
threaten the ability of the internal audit activity to
carry out internal audit responsibilities in an
unbiased manner.
 The audit charter should establish independence of
the internal audit activity by the dual reporting
relationship to management and the organization’s
most senior oversight group.
Wednesday, March 23, 2016
Independence & Objectivity
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 Objectivity is an unbiased mental attitude that allows
internal auditors to perform engagements in such a
manner that they believe in their work product and that
no quality compromises are made (1100–IPPF).
 The internal auditor occupies a unique position in an
organization as he or she is employed by the
management.
 S/he is expected to review the conduct of management
which can create significant tension since the internal
auditor’s independence from management is necessary
for the auditor to objectively assess management’s
action.
Wednesday, March 23, 2016
Organizational & Functional Independence
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 The CAE must report to a level within the organization
that allows the internal audit activity to fulfill its
responsibilities (1110-1-PA).
 The CAE should report functionally to the Board and
administratively to the CEO of the organization.
 The CAE should have direct communication with the
Board by attending and participating in board meetings
that relate to the board’s oversight responsibilities for
auditing, financial reporting, organizational governance,
and control.
 CAE can also have private meeting with the board, at
least annually (PA-1111-1).
Wednesday, March 23, 2016
Organizational & Functional Independence
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Ability to talk
to the right
people
Say what
needs to be
said to the
person who
needs to hear
it
independence
Reporting
Relationship
Access to
senior
management

Not Responsible for audit area
Wednesday, March 23, 2016
Individual Independence of Internal Auditor
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 Internal auditor is independent when he/she renders
impartial and unbiased judgment in the conduct of
his/her engagement.
 Internal Auditor must have an impartial, unbiased
attitude and avoid any conflict of interest.
 Internal auditor should uphold integrity not be
influenced from any corner while performing his/her
her engagement.
Wednesday, March 23, 2016
Individual Objectivity on Internal Auditor
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 Objectivity is the mental attitude which internal auditor
should maintain while performing engagement.
 Internal auditor should have impartial, un-biased
attitude and avoid conflict of interest situations, as that
would prejudice his/her ability to perform the duties
objectively.
 The results of internal audit work should be reviewed
before they are released in order to provide a reasonable
assurance that the work has been performed objectively.
 Internal auditor should not assume any operational
responsibility.
Wednesday, March 23, 2016
Objectivity
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No bias
Not influenced
by others
Say what needs
to be said
perspective
Tone
balance
“frame of mind Relies upon the professionalism of the internal
auditor”
Wednesday, March 23, 2016
Impairment to Independence/Objectivity
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 Impairment to organizational independence and
individual objectivity may include, but us not limited
to, personal conflict of interest, scope limitations,
restrictions on access to records, personnel, and
properties, and resource limitations, such as funding
(PA-1130-1).
 Impairment can also be presumed when auditors
perform an assurance review of any activity for
which they had any authority or responsibility within
the past year or a period significant enough to
influence their judgment or opinion.
Wednesday, March 23, 2016
Impairment to Independence/Objectivity
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 Internal auditors should not accept gifts or favors
from others such as employees, clients or business
associates.
 Internal auditors should adopt a policy that endorses
their commitment to abiding by the Code of Ethics,
avoiding conflicts of interests, disclosing any activity
that could result in a possible conflict of interest.
 Staff assignment of internal auditors should be
rotated periodically whenever it is practicable.
Wednesday, March 23, 2016
Q&A
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“People who know what they are talking about, needs
no PowerPoint” Steve Jobs
Thank you for listening
Wednesday, March 23, 2016