IS Auditor's Independence

C.

The independence of an IS auditor is a critical element in ensuring that the audit is objective, unbiased, and reliable. Any situation that impairs the auditor's independence can lead to a conflict of interest, which can compromise the audit's credibility.

Out of the four options given, the one that is most likely to impair an IS auditor's independence is Option C: "knows that the application contains the auditor's personal transactions."

When an IS auditor is auditing an application that contains their personal transactions, they have a vested interest in the audit's outcome. If the audit reveals any issues or weaknesses in the application, it could potentially reflect poorly on the auditor's personal transactions. Conversely, if the audit finds no issues, the auditor may be tempted to overlook any shortcomings in the application to avoid implicating themselves.

Performing a development review of the application (Option A) or designing an embedded audit module for the application (Option B) does not necessarily impair an auditor's independence. However, if the auditor was involved in the development of the application or the design of the audit module, their independence may be compromised. It's essential to ensure that auditors do not participate in activities that could create a conflict of interest or bias.

Reporting to an individual responsible for the application (Option D) could also lead to a potential conflict of interest, as the individual may attempt to influence the audit's outcome to protect their interests. However, if the auditor is independent and reports directly to senior management, this risk can be minimized.

In summary, an IS auditor's independence is most likely to be impaired if they audit an application that contains their personal transactions (Option C). It's essential to maintain independence throughout the audit process to ensure the reliability and credibility of the audit results.