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CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

Kaveri Foods Ltd. has an internal audit head who also approves vendor payments every week. Which concept of internal audit is most directly compromised by this arrangement?

Independence and objectivity are compromised. An internal audit head who approves vendor payments takes an operational role and would end up reviewing his own work, creating a self-review threat. Internal audit must remain free from operational responsibility so that its assessments are unbiased.

  1. AIndependence and objectivity of the internal audit functionCorrect
  2. BTimely filing of the annual return with the Registrar
  3. CThe statutory auditor's right of access to books
  4. DRotation of the statutory auditor after the prescribed term

Explanation

If the auditor approves payments, he would later be reviewing his own decisions, creating a self-review threat. This impairs independence and objectivity, which are core to the internal audit concept. The other options concern matters not affected by this arrangement.

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