Auditor Independence

Internal audit is an independent objective assurance activity.

To ensure that the activity is carried out objectively, the internal auditor must have his/her independence protected.

Auditor should be Independent in Mind as well as Appearance.

Risk if auditors are not independent:

– Potential risks if auditors not independent.

– Fail to report control breaches

– Ignore discrepancies.

– Back down on matters of principle.

– Accept explanations without checking.

– Turn a blind eye to unethical practices.

– Give undeserved positive feedback.

Protecting the Independence:

The internal auditors should be independent of executive management and should not have any involvement in the activities or systems that they audit.

The head of internal audit should report directly to a senior director or the audit committee. In addition, the head of internal audit should have direct access to the chairman of the board of directors, and to the audit committee, and should be accountable to the audit committee.

The audit committee should approve the appointment and termination of appointment of the head of internal audit.