Which of the following would BEST indicate the independence of the internal audit function?
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A. B. C. D.B.
The independence of the internal audit function is a crucial aspect that ensures the credibility and effectiveness of the internal audit activity. Therefore, it is essential to identify the measures that BEST indicate the independence of the internal audit function.
A. Engagement letter: An engagement letter is a document that outlines the scope, objectives, and responsibilities of the internal audit activity. While it is a critical document in the internal audit process, it does not necessarily indicate the independence of the internal audit function.
B. Audit charter: An audit charter is a formal document that outlines the purpose, authority, and responsibilities of the internal audit activity. It establishes the internal audit activity's independence, governance, and accountability and should be approved by the board of directors. Therefore, the audit charter is an important indicator of the independence of the internal audit function.
C. Organizational structure: The organizational structure of the internal audit function can also be an indicator of independence. When the internal audit function is free from influence or pressure from the auditee or other stakeholders, it is likely to operate independently. Therefore, an organizational structure that separates the internal audit function from other business units can enhance the independence of the internal audit function.
D. Dedicated chief internal auditor: The appointment of a dedicated chief internal auditor can also be an indicator of the independence of the internal audit function. The chief internal auditor should be free from any conflicts of interest, and their authority and responsibilities should be clearly defined. This measure can help ensure that the internal audit function operates independently and is not influenced by other business units.
In conclusion, while all of the above measures are important for ensuring the independence of the internal audit function, the BEST indicator of independence is the audit charter, followed by the appointment of a dedicated chief internal auditor and organizational structure.