An auditor spent three years as the payroll supervisor before joining internal audit. Eleven months later, she is assigned the payroll controls engagement. Nobody has done anything wrong. Her objectivity is still impaired.
Objectivity is the unbiased mental attitude that lets an auditor make judgments without subordinating them to anyone else's. Independence belongs to the internal audit function as a whole (the chief audit executive's functional reporting to the board). Objectivity belongs to the individual auditor on a specific engagement. This lesson is about the individual.
Impairment is assessed at three levels: the individual auditor, the engagement, and the function. Conflicts of interest may arise at any of the three. An individual impairment does not automatically taint the function. It does disqualify that person from that work unless the assignment is changed or safeguarded, which is the practical impact of self-review and familiarity bias on engagements.
Three things drive the assessment, and the rest of this lesson takes them in order: the impact of self-review and familiarity bias on engagements, the situations where conflicts of interest...
Common mistakes
- Treating the auditor's self-assessment as the cure. "I can remain impartial" resolves nothing. Only reassignment, safeguards, or disclosure resolves an impairment.
- Confusing independence with objectivity. Independence is the function's freedom from interference at the organizational level. Objectivity is the individual's mental attitude on an engagement.
- Assuming all advisory work disqualifies. Recommending or training is permitted. Designing, implementing, approving, or owning the control creates the self-review threat.
Bottom line
- Objectivity is the individual auditor's unbiased mental attitude; independence is the function's organizational freedom.
- Impairment is assessed on appearance to an informed observer, not only on actual bias.
- Self-review arises from performing, designing, implementing, approving, or supervising the subject matter under audit.
- Cooling-off convention: 12 months after leaving an operational role before auditing that area.
Exam shortcut
Scan the stem for the auditor's verb history. Performed, built, approved, or supervised means self-review. Friend, relative, five years on the same entity, or accepted a gift means familiarity or conflict of interest. Both categories land on the same remedy tree, so classifying quickly matters more than labeling perfectly.
The full lesson (about 2,218 words, 15 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- 2
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