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CS Professional · Internal and Forensic Audit · Practices related to Internal Auditing

During an audit of Sundaram Foods Pvt Ltd, internal auditor Rohit finds that his brother-in-law is a major vendor whose invoices he must test. What is the most appropriate action under an internal audit code of ethics?

Rohit should disclose the relationship to the audit head and abstain from auditing that vendor. A family relationship can impair objectivity in fact or appearance, and disclosure must be made upfront, not conditionally after errors are found.

  1. ATest the invoices but exclude his brother-in-law's name from the report
  2. BDisclose the relationship to the audit head and abstain from auditing that vendorCorrect
  3. CContinue the audit and disclose the relationship only if errors are found
  4. DComplete the audit quietly since the relationship is not financial

Explanation

A personal relationship can impair objectivity, whether real or apparent. The auditor should disclose it promptly and be excused from that area. Disclosing only if errors are found defeats the purpose, as the impairment exists regardless of findings.

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