Standard 1130 – Impairment of independence or impartiality
Standard 1130 – Impairment of independence or impartiality
The distortion of independence that we will discuss in this section.
If independence or impartiality is impaired in reality or appearance, the details should be disclosed to the concerned persons in a suitable manner.
The nature of this disclosure depends on the degree of impairment of independence and impartiality.
Interpretation:
Impairment of organizational independence and individual impartiality may not be limited to conflicts of personal interests, limitations of scope of operations, limitations of access to records, people, assets and resources, such as financial resources.
Determining the appropriate persons to whom the details of the distortion of independence and impartiality should be disclosed.
According to the provisions of the internal audit charter and the nature of the distortion, it depends on the expectations from the internal audit and the responsibilities of the internal audit manager in front of the senior management and the board of directors.
the beginning
The standard requires the internal audit manager to disclose actual and perceived impairments to independence or impartiality.
Therefore, she must have a clear understanding of the requirements of independence and impartiality, as stated in the code of professional conduct and standards 1100, 1110, 1111, 1112, 1120.
Furthermore, by sharing these requirements with the board of directors and senior management, the chief audit executive helps ensure that they are aware of the sensitivity, impartiality, and independence required for an effective internal audit unit.
Typically, the board and senior management will want to discuss to whom and how violations of independence and impartiality are disclosed, depending on the nature and potential impact of the violation.
In order to fully recognize and understand impartiality and independence, it is important for internal auditors to pay attention to the perspectives of interest groups related to them and the conditions that can distort independence or impartiality in reality (or in appearance).
Often, the director of internal audit develops a practice manual or internal audit policy manual;
which contains discussions about the organizational independence and impartiality of internal audit, the nature of confounding factors and how internal auditors deal with the damage caused.
Executive considerations
As described above, many internal audit managers have a practical manual or internal audit policy manual that outlines related expectations and requirements for effective management of impartiality and independence and related harms.
Such a directive may, in addition to defining independence and impartiality, specify specific standards of relevance.
It may also specify the types of situations that can occur, or pretend to occur, along with expected damages and actions;
that the internal auditor must do when faced with potential issues that impair independence and impartiality.
The state of vulnerability of independence and impartiality usually includes self-interest, self-interest in revision, nepotism, bias or influence, and misplaced.
These situations can lead to conflict of personal interests, limitation in scope of audit, limitation of resources or limitation in access to documents, people and property.
Examples of the distortion of the internal audit’s organizational independence, which can also distort the neutrality of the internal audit if it happens, are as follows:
.The internal audit manager has a wider responsibility than the internal audit and performs the audit of another department under her responsibility.
.The supervisor of the internal audit manager has a responsibility beyond the internal audit and the internal audit manager is an auditor within the scope of responsibility of her supervisor.
.The internal audit manager does not have direct communication and interaction with the board of directors.
.The budget of the internal audit unit should be reduced to such an extent that the internal auditor cannot perform her responsibilities as stated in the internal audit charter.
(The 2020 standard, entitled Program Submission and Approval, provides additional guidance on the impact of resource constraints).