Question

You are the director of internal audit at Sargon Industries, a large publicly tradedmanufacturing company. You recently met with the manager of data processing and expressed the desire to establish a more effective relationship between the two departments. Subsequently, the manager of data processing requested your assistance on a new computerized accounts payable system being developed. The manager recommended that the internal audit function assume line responsibility for examining suppliers’ invoices prior to payment. The manager also requested that the internal audit function make suggestions during the development of the system, assist in its installation, and approve the completed system after making a final review.Evaluate each of the following requests made by the manager of data processing within the context of The IIA’s International Professional Practices Framework (that is, the Definition of Internal Auditing, the Standards, the Code of Ethics, the Practice Advisories, etc.) in terms of its potential impact on internal auditors’ objectivity.
A. The request that the internal auditor be responsible for examining suppliers’ invoices prior to payment.1

B. The request that the internal auditor make suggestions during the development of the system.

C. The request that the internal auditor assists in the installation of the system and approves the system after making a final review.2

Answer 1

Internal Audit is led in different lawful and social situations; for associations that vary in reason, size, intricacy, and structure; and by people inside or outside the association. While contrasts may influence the act of inner reviewing in every condition, conformance with The IIA's International Standards for the Professional Practice of Internal Auditing (Guidelines) is basic in meeting the obligations of inner reviewers and the interior review action.

When performing counselling administrations, the inner examiner ought to keep up objectivity and not accept the executive’s accountability. Every single interior examiner is responsible for accommodating with the models identified with singular objectivity, capability, and due expert consideration and the benchmarks applicable to the presentation of their activity duties. Boss review administrators are also responsible for the interior review movement's general conformance with the Standards.

Objectivity means being honest about some opinion independently / without any influence.

1.

If all the invoices are already examined by the auditor then this will reduce chances of error but the objectivity in end Audit is compromised because after examination once the auditor might not verify the transactions again considering he had already examined the payments and it may lead to a inappropriate audit. Because of this analysis and other audit procedures might be skip which could be highly helpful to find some error in financials by establishing the relationships and application of various audit procedures.

2.

If auditor is requested to provide his suggestions then he could help in creating a better system which automatically reduces the chances of errors as he will integrate mechanisms which will highlight frequent mistakes made and others as per requirements and experience. This will also increase auditors understanding about the system and its processes and finding other loopholes where errors could occur and he could pay more attention to higher risky areas and rely upto specific extent on the system.

3. If auditor is requested to provide his assistance in installation of the system and approval after final review then he could help in creating a secure system with limited rights on basis of the person need to know basis and this will also lead auditor to manage entire system and financials as per his requirements and this will also increase his confidence on the system, But this will also make auditor rely on such system and this might influence the auditor in application of his audit procedures and other assessments and the same results in affecting objectivity of the auditor.