Question

Internal auditing has evolved to meet the needs of business, government, and nonprofit organizations. Initially, internal auditors supplemented the work of the independent auditors by helping to ensure the accuracy of the organization's financial information. Today, internal auditors can be as independent as external auditors. Discuss how an Internal Auditor may safeguard against impairment of independence and why an external auditor may have more of an independence issue than an internal auditor.

Answer 1

The committee should safeguard the independence by approving the internal audit charter and mandate periodically. ... The internal auditor should have an impartial, unbiased attitude and avoid conflict-of-interest situations, as that would prejudice his/her ability to perform the duties objectively.

The external auditor can use internal auditors who may have relevant expertise in particular areas, and. The external audit team can focus on the more significant audit issues.Independence of the external auditor means independence from parties that have an interest in the results published in financial statements of an entity. The support from and relation to the Audit Committee of the client company, the contract and the contractual reference to public accounting standards/codes generally provides independence from management, the code of ethics of the Public Accountant profession) helps give guidance on independence form suppliers, clients, third parties...

Internal and external concerns are convoluted when nominally independent divisions of a firm provide auditing and consulting services.[1] The Sarbanes-Oxley Act of 2002 is a legal reaction to such problems.