Running Head: AUDIT INDEPENDENCE AND OBJECTIVITY

Internal Audit Independence and Objectivity

Research

By: Mariam Al-Qanea

AUDIT INDEPENDENCE AND OBJECTIVITY

Table of Contents
Chapter One....................................................................................................3
Introduction..................................................................................................3
Background................................................................................................3
Research Objectives and Questions...........................................................6
Chapter Two.....................................................................................................7
Literature Review..........................................................................................7
Rules on Independence and Objectivity.....................................................7
Chapter Three................................................................................................10
Methodology...............................................................................................10
Research Methodology.............................................................................10
Data Collection Methods..........................................................................10
Research Tool...........................................................................................11
Chapter Four..................................................................................................13
Results........................................................................................................13
Main Results on Safeguards to Organizational Independence.................13
Main Results on Safeguards to Objectivity Internal Auditor.....................15
Chapter Five...................................................................................................22
Discussion/Conclusion.................................................................................22
References..................................................................................................25

AUDIT INDEPENDENCE AND OBJECTIVITY

Internal Audit Independence and Objectivity

Chapter One
Introduction
Background
The financial markets have globalized and liberalized and led to the
opening of international markets that have offered the potential of huge
profits, unfortunately exposing the companies to strong competition and the
high turnover of capital. To compete and develop internationally the
governments and executives are now aware that the need for capital
exceeds the normal financial resources. 'Competition is now the base of the
modern business, where a company's success is focused mainly on adapting
to market and maximizing profits. Thus, according to traditional financial
theory, maximization the wealth is the goal of any business owners. As these
two aspects shape the stakeholder behavior it must comply with ethical
standards.
(Accounting and Management Information Systems Vol. 11, No. 1, pp. 112
130, 2012, CORPORATE GOVERNANCE, INTERNAL AUDIT AND
ENVIRONMENTAL AUDIT - THE PERFORMANCE TOOLS IN ROMANIAN
COMPANIES- The Bucharest Academy of Economic Studies, Romania)
The internal auditor occupies a unique position, since being employed
by management and also to review the conduct of the same, which can
create significant tensions. On the one hand, it is necessary internal auditor

AUDIT INDEPENDENCE AND OBJECTIVITY

who is independent of the direction in order to objectively evaluate their

actions; however it is clear that the internal auditor depends on the direction
to be an employee (Pickett 2011).
Consequently, the internal audit activity should have a mandate
through a written charter that establishes its purpose, authority and
responsibility, in order to support their independence and objectivity within
the organization. Internal auditors are independent when they provide fair
trials and neutral to perform their jobs. To ensure independence, best
practices suggest the Chief Audit Executive (CAE) should report directly to
the audit committee or its equivalent.
For administrative purposes the day, the CEA (Chief Executive Auditor)
should report to the highest executive of the organization (e.g. CEO or chief
executive officer -CEO-). The CAE should have direct communication with the
audit committee, which reinforces the hierarchy of internal audit within the
organization, enables full support and unrestricted access to organizational
resources, and ensures that there is no impairment to independence (Reding
2013). This provides sufficient authority to ensure broad audit coverage,
adequate consideration of communications from their jobs, and appropriate
action on their recommendations. Independence is further improved if the
CEA reports to the board by the audit committee part thereof, which makes
the planning, execution and results of the audit work. The audit committee is
also responsible for the appointment, removal and setting compensation.
The committee must protect the independence approving the internal audit

AUDIT INDEPENDENCE AND OBJECTIVITY

charter and mandate periodically. Objectivity is a mental attitude which

internal auditors should maintain while performing their jobs. The internal
auditor should have an impartial, neutral mental attitude and avoid conflicts
of interest, as that would prejudice their ability to perform the duties
objectively. The results of internal audit work should be reviewed before
being cast, in order to reasonably ensure that the work is performed
objectively. Internal auditors should not assume operational responsibility. It
is presumed that objectivity is impaired when internal auditors perform an
assurance review of an activity for which has had authority or responsibility
within the previous year or a period significant enough to influence their
judgment or opinion. Internal auditors should not accept gifts or favors from
others such as employees, customers or business partners. Internal auditors
should adopt a policy that addresses their commitment to comply with the
Code of Ethics, avoid conflicts of interest, and declare any activity that can
result in a possible conflict of interest. The allocation of internal audit staff
should be rotated periodically whenever possible.
The conventional role of sureness of internal audit function is
completed with its connection in improving internal controls and offering a
substantial level of comfort to the audit committee. Internal auditors
knowledge, provide a major source of comfort to the audit committee, about
risk management and internal control, combined with inter-personal skills
and behavior, their domestic position, familiarity with the company and staff
(Sarens et al., 2009). Previous research in this area, supporting the argument

AUDIT INDEPENDENCE AND OBJECTIVITY

that the imbalance of information between audit committees and company

management is less when there is interaction between the audit committee
and

internal

audit

function

(Zakaria

2014),

without

detailing

these

interactions.
Internal audit is one of the main objectives which assure the exact way
to add value by improving the company and to achieve its goals. Internal
audit guides the company in a systematic and methodical process of
evaluating and improvising the effectiveness of risk management, control
and governance. In simple words, internal audit is one of the most powerful
means of monitoring and promoting good governance system in a company.
(Zakaria 2014)
Internal audit helps the company in operating according to the
standards and regulations by abiding specific controls and procedures and
ensure that those in-charge with governance in internal company processes
are adequate and functional. Internal audit plays an important role to take
decisions in the company of important issues which are implied on the
companys activity system as a whole, thereby creating the possibility of
guiding the internal audit activity toward the plans and problems the
management is working for (Moeller 2009).
Internal audit is the best rule for defense against fraud, it both detects
risks and prevent and monitors fraud and acting as one of the tools available
to the audit committee, able to mainly evaluate the risks of fraud and antifraud measures implemented by the executive management (Mefford 2014).

AUDIT INDEPENDENCE AND OBJECTIVITY

Analytical Model for Evaluating the Strength of the Internal Audit Function

Research Objectives and Questions

Research Objectives
1- To identify the independence and objectivity of internal audit in the
company.
2- To minimize the frauds and errors while performing day to day
activities in the companies throughout the internal audit system.
3- To realize the impact of internal audit on value adding and decision
making.
4- To evaluate effectiveness and efficiency of operations and safeguarding
of assets of the company.

AUDIT INDEPENDENCE AND OBJECTIVITY

Research Questions

Does Internal Audit in accordance with independence and objectivity

procedures
What role does internal audit play in a company?
How does internal audit defend the company against frauds?
How do the evaluations of an internal audit committee accomplish its
objectives?

Significance Of The Research

The

research

is

significant

in

the

sense

that

internal

audit

independence and objectivity has a very strong impact on the success of the
organization. Internal audit should be independent and objective away from
influence of external or internal factors. Internal auditor must abide to ethics.

Organization Of This Paper

1. Introduction: contains introduction about the topic, its objectives,
and significance.
2. Literature Review: Contains various literatures from many articles
of different authors that discuss the topic.
3. Methodology: Consists of method of which will be used to
accomplish this paper. This includes primary and secondary
research phases, also survey tool.
4. Discusses of results: This chapters discusses and analyzed the
results of the survey
5. Conclusion: This chapter discusses the conclusion reached.

AUDIT INDEPENDENCE AND OBJECTIVITY

Chapter Two
Literature Review
The auditor objectivity and independence requirements are covered in
audit standards. One of the purposes of the "Standards for the Professional
Practice of Internal Auditing" is the to define the basic principles that
represent the practice of internal auditing as this should be, and provide a
framework to practice and promote a wide range of activities internal audit
of added value (Sarens, G., et al. (2009). To fulfill these purposes, standards
require that internal auditors have among their attributes being independent
and objectives for the performance of their work. The term refers
independence the auditor in charge of the area should respond to such a
hierarchical level in the organization that enables it to issue impartial and
balanced views, which is essential to perform properly audited. Also, this
independent function within Organization allows you to be free from
interference in determining the scope audit, during the execution of the
same and when communicating results. (Pickett 2011)
When we speak of objectivity, we mean that the internal auditor should
have an attitude neutral and unbiased (Moeller 2009), and must avoid
conflicts of interest (Cangemi 2013). On the subject of "conflict of interest"
rules indicate that the internal auditor should refrain from evaluating
operations in cases where there is provided a service activity which he/she
had responsibility within the past year. It is clear that the latest updates to
the standard distinguish cases of consulting; allowing internal auditors can

AUDIT INDEPENDENCE AND OBJECTIVITY

10

provide those services even if they are related to operations for which they
had had responsibilities.

Rules on Independence and Objectivity

1. Independence and Objectivity
The internal audit activity must be independent, and internal auditors
should be objective in performing their work. (Stewart, 2009)
2. Organization Independence
The chief executive audit should report to a level within the
organization that allows the activity of internal audit fulfill their

responsibilities. (www.aicpa.org)
The internal audit action must be purified from intrusion in determining
the scope of internal auditing, performing work, and communicating

results.
3. Individual Objectivity
Internal auditors should have an impartial, unbiased attitude and

evade conflicts of interests.

Impairments to Independence or Objectivity
If independence or objectivity is reduced in fact or appearance, details
of the weakening should be disclosed to appropriate parties. Nature of
this communication will depend upon the degree of effect.( Stewart,

2009)
Internal auditors should abstain from evaluating specific procedures of
which they were previously responsible. It is presumed to be impaired
objectivity if an auditor provides assurance services for an activity
which he himself had responsibility within the previous year.

AUDIT INDEPENDENCE AND OBJECTIVITY

11

Audit responsibility should be overseen by someone outside the

internal audit activity such as CEO. (Moeller, 2009)

Internal auditors may provide consulting services related operations of

which they were previously responsible for.

If internal auditors have potential impairments to independence or
objectivity consulting services related to them that have been
proposed, they must report the situation to the stakeholders before

they accept the job.( Moeller, 2009)

The requirements of the Code of Ethics and International Standards for

the Professional Practice of Internal Auditing (Standards).

Expectations of stakeholders, which could be the shareholders, board
of directors, audit committee, management, legislative bodies, public

entities, regulatory agencies and public interest groups.

The authorizations and restrictions contained in the statute of the
internal audit activity.

The disclosures required by the Rules.

Coverage of audit activities or responsibilities undertaken by the

internal auditor.
The significance of the operational function is for the organization (in

terms of revenues, expenses, reputation and influence).

The extent or duration of the assignment and scope of responsibility.
Proper segregation of duties.
If there is any history or other evidence that the objectivity of the

internal auditor may be at risk.

When the internal audit activity accepts operational responsibilities
and that operation is part of the audit plan, the CEA must:

AUDIT INDEPENDENCE AND OBJECTIVITY

12

Minimize the impairment of objectivity using a contracted entity (a

third party), or contracted external auditors to audit those areas

reporting to the CEA .

Confirm that people with operational responsibility for those areas that

report to CEA audits do not participate in that operation.

Ensure that auditors performing assurance work areas reporting to the
CEA are supervised by senior management and the board, and report

the results of work to them.

Declare the operational responsibility of the auditor for that function,
the significance of the operation for the organization (in terms of
expenses, or other pertinent information), and the relationship of those
who audited the function.

AUDIT INDEPENDENCE AND OBJECTIVITY

13

Chapter Three
Methodology
Research Methodology
The research depends mainly on a method of logical statistics and
content with addition to secondary and primary data. Secondary data is
obtained through references, researches, and universities research papers.
And the initial data is collected through a questionnaire, which is designed
depending on questions of the problem which are available in the reviews. To
attain the objectives of the study the statistical descriptive style analysis
techniques have been used to.
In order to weigh the importance given by experts cough up the study
to each of the safeguards he used the prospective method called Delphi.
Thus, is intended to help improve future decision-making on thereof. Linstone
and Turoff (1975) define the Delphi method as a system of structuring a
communication process group that is effective in allowing a group of
individual duos (experts), as a whole, to address a complex problem,
whereby the process results in an expert consultation based in an iterative,
anonymous and controlled process, which is obtained feedback through its
multiple rounds of surveys. In each round, a questionnaire was sent to each
interviewee. The statistical treatment of their responses and those of other
individuals respondents is forwarded with the same questionnaire a second
round to confirm their answers or modify them, if the respondent deems

AUDIT INDEPENDENCE AND OBJECTIVITY

14

appropriate. And so on until reach even level of consensus on the answers or

not occur modifications thereof.

Data Collection Methods

Primary Research Method
Includes data collected from primary sources such as survey.

Secondary Research Method

Includes these resources:
1- Books and journals
2- Websites
3- Other materials

Research Tool
The importance of safeguards was measured through a Likert scale
from 1 to 5. The experts were organized on 2 groups: internal auditors (13 in
total) and specialists (11 Individuals with knowledge of auditing, internal
control and financial sector). The number of rounds required were 2 as from
the first high consensus was obtained in the opinions of experts. In the
analysis the following statements were made:
Proposition 1. There is no agreement in the responses of Experts:
under this first proposition was intended to observe the existence of
consensus in the responses of individuals, both for the full panel of experts

AUDIT INDEPENDENCE AND OBJECTIVITY

15

as a way separate internal auditors and specialists. To test this proposition

the interquartile range was used relative (RIR) and Kendall coefficient of
concordance.
Proposition 2. Two samples from the same population: under this
second proposition is intended to note that there a differentiated view of
belonging to one group or another experts. Thus, the opinion of an expert
could be conditioned by their membership in a group or on our own interests,
which would no objective responses. The statistical detection subgroup of
review was evaluated using the test statistical nonparametric Mann-Whitney.
Proposition 3. There is no agreement in responses between the first
and the second round: apart from the consensus, as already commentary
state, it is essential to obtain stability in responses across of conducting the
various rounds performed. He raised this last proposition to analyze the
stability of the answers between the two rounds in order to determine
whether or not there has been change of opinion from one to another. The
contrast of this proposition was conducted by varying the RIR.
Apart from these observations, a statistical analysis was performed of
central tendency and dispersion level in order to observe the centrality of
opinions on the one hand, and the dispersion in responses, on the other,
employing statistical as the median, standard deviation, quartile (Q1, Q2 and
Q3) and interquartile range (IR).

AUDIT INDEPENDENCE AND OBJECTIVITY

16

Chapter Four
Results
Main Results on Safeguards to Organizational Independence
The results obtained for the independent safeguards organizational
independence are referenced descriptive shown in Table 1 and can be
summarized:
Descriptive Safeguards For The Organizational Independence
Averag Standard
Min.
Max. Q
Q2
e
deviation
1
Mediu
m
Descriptions for the full sample (N
= 20)
Dependence
4.1
0.852
3
5
3
4
Independence activities
4.65
0.587
3
5
4
5
Statutes
3.115
0.405
1
5
1
4.3
Appointment and removal
0.933
0.175
3
4
2
5
Quality
3.6
0.754
3
5
3
3
Meetings
3.45
0.686
3
5
3
3

Q3

RI

0.5

0.2

3.2

2.7

0.4

3.0

4.2

0.3
0.3
3
0.3
3

Descriptions for the sample of

auditors (N = 12)
Dependence
0.778

4.5

3.02

0.672

3.5

5.0

4.45

0.295

5.3

3.33

1371

3
2.
5

2.94113
4.65618
9

1.5

3.67

0.888

4.5

1.5

3.58

0.793

0.5
0.3
3

3.75
3.38

0.886
0.55

3
1

5
4

3
2

3.5
3.83

4.5
2.29

1.5
5.8

0.4
3
0.0

Statutes
Appointment and removal

3.6

Meetings

Descriptive specialist for sample (N

= 8)
Dependence
Independence activities

0.2
2
0.1
2
0.0
5
0.3
7

4.33
Independence activities

Quality

RIR

AUDIT INDEPENDENCE AND OBJECTIVITY

17

Statutes
4.05

0.145

4.41

2.70

1
2.
5

3.37

1.061

3.5

2.75

0.961

2.69

6.75

2.58

0.055

4.67

3.70

Appointment and removal

Quality
Meetings

Organizational Unit within the organizational chart: organizational unit

within the organizational company is valued by experts as a safeguard pretty
important (4.10 average of 5) in order to ensure organizational
independence. This review is dis- Persian, though consensual, i.e., there are
many opinions concentrated in the middle (4), and as many in the ends. This
dispersion is due to the opinion given by specialists, and although in both
groups give opinion of these is more dispersed between these values that in
the case of internal auditors.
Independence of the audited activities and the system internal control
over: this safeguard is considered the most important in safeguards to
independence organizational with 4.65 averaged over 5, and is highly
consensual. - Reflection of supporting the role of internal audit in the statutes
Audit: the fact that there are statutes that support this function was assessed
with significant 4.05 out of 5. Furthermore, it should be noted that this score
is dispersed according to the RI, but not according to the standard deviation.
Appointment and dismissal of the Internal Auditor is the worst
safeguard valued within the organizational independence. Our score average

9
4.7
4
1.5
4.0
6
2.0
9

6
0.0
7
0.4
3
0.1
5
0.3
4

AUDIT INDEPENDENCE AND OBJECTIVITY

18

was 3.35 out of 5, while the assessments given scattered by experts,

although consensual.
Revisions to the quality of internal audit work: the experts assessed a
3.60 out of 5, and although this safeguarding no dispersion considering all
experts, yes the existence of dispersion observed in the responses offered by
the internal auditors, following the RI. - Number of meetings and meetings
with the council: despite the amount of research on this topic, both internal
audit and external experts evaluated this concerned only with 3.45, the
second worst valued within organizational independence, presenting these
scores Non- dispersion and consensus.

Main Results on Safeguards to Objectivity Internal Auditor

In Table 2, we can see the descriptive obtained for safeguards the
objectivity of the internal auditor, are highlighted in the following results:
Table 2
Descriptions for safeguards objectivity of the internal
Avera Standar Mi Ma Q Q2
ge
d
n.
x.
1 Medi
deviati
um
on
Descriptions for the
full sample (N = 20)
Responsibilities
3.05
0.3878 3
5
1 3.4
Statement
8
Rotation
2.84
1.4959 1
4
4 4.2
2
Activities 12 months
4.07
0.2364 3
5
3 0.0
5
Strong organizational
3.12
0.4054 2
4
4 4.3
governance
5
Incentives
0.93
0.1754 1
5
3 5.0

auditor
Q R RIR
3 I

4.
8
2.
8
1.
9
3.
2
1.

3.
5
2.
6
3.
4
2.
7
4.

0.2
79
0.1
28
0.1
61
0.3
62
0.2

AUDIT INDEPENDENCE AND OBJECTIVITY

Working groups

3.85

Passage of time and

changing
circumstances
Internal consultations

3.59

Selection

3.02

Training

4.45

Supervision

2.56

Outsourcing

4.51

Descriptions for the

sample of auditors (N
= 12)
Responsibilities
Statement
Rotation

3.57

3.67
2.55

Activities 12 months

4.32

Strong organizational
governance
Incentives

3.79

Working groups

4.56

Passage of time and

changing
circumstances
Internal consultations

2.44

Selection

4.05

Training

3.34

Supervision

2.37

3.14

3.38

1
0.7956
2
0.7855
7

19

4.6

2.9

0.2860
6
0.6717
8
0.2949
6
0.7741
9
1.1385

2.5

3.5

5.3

2.0

3.5

0.2536
9
1.1442
9
0.1657
9
0.8495
4
1.2069
8
0.0399
8
0.6475
9

4.5

3.1

5.0

4.6

2.0

3.2

1.8

0.5490
1
0.1452
9
0.0161

3.8

4.4

2.0

1.1555
2

4.5

9
5

2
2

83
0.3
33
2. 2. 0.0
4 7 09
1.
6
2.
9
4.
7
3

5.
2
5.
1
3.
7
2.
5
4. 4.
6 3

0.2
47
0.1
22
0.0
54
0.0
42
0.1
11

3.
9
3.
6
3.
8
3.
9
3.
6
3.
9
3.
9

2.
4
4.
8
2.
9
3.
8
5.
3

0.0
92
0.1
71
0.4
73
0.3
39
0.3
26
0.2
71
0.3
27

5.
9
4.
7
3.
8
4. 3.
7 4

0.0
64
0.0
73
0.2
55
0.1
16

2.
3
2.
7
2

4
3

AUDIT INDEPENDENCE AND OBJECTIVITY

20

Outsourcing

3.30

0.4691
8

3.1

3. 4. 0.0
7 3 39

Descriptive specialist
for sample (N = 8)
Responsibilities
Statement
Rotation

4.22

0.3211

4.50

5.37

2.90

Activities 12 months

2.75

2.69

Strong organizational
governance
Incentives

2.58

4.67

4.19

Working groups

4.05

5.14

Passage of time and

changing
circumstances
Internal consultations

3.79

1.3561
6
0.9610
7
0.0545
1
1.2046
5
0.0762
1
0.4537
5

3.51

3.
2
3.
9
6.
8
3.
7
1.
2
2.
4
2.
2

4.31

Selection

3.75

3.54

Training

4.68

3.76

Supervision

3.39

0.6504
6
0.9984
8
0.4037
4
0.3519

1.76

Outsourcing

2.14

0.8528
8

3.79

1.96

5.09

2.
1
1.
3
4.
1
2.
1
4.
6
2.
6
4

0.5
41
0.0
63
0.1
48
0.3
36
0.1
96
0.1
08
0.1
61

3. 4. 0.2
1 2 41
4 3. 0.2
4 17
1. 2. 0.0
9 6 39
4. 3. 0.1
3 7 47
4. 0. 0.1
6 2 82

Statement of responsibility about possible conflicts of interests: this

safeguard scored a 3.60 in importance of 5, noting the existence of
dispersion responses to shed more than 1 RI.
Rotation of internal auditors in office: the view experts is different when
placed as the tenth safeguard for importance, valuing a 3.10 out of 5, op no
disperse inion and concentrated.

AUDIT INDEPENDENCE AND OBJECTIVITY

21

No audit activities with previous responsibilities: this salvation save the

objectivity of the internal auditor was qualified with a 4.45, placing it in the
top position in the ranking of importance. The opinion given was consensual
and concentrated.
Existence of a strong organizational governance: this safeguard was
valued by experts with a 3.55 out of 5. It was found dispersion in scores of
internal auditors, both in terms of the standard deviation as the RI, which
affected not recognize a similar level of importance for this safeguard.
Incentives: the Delphi study shows an average score of 3.85 out of 5.
The ratings given show an RI of 1.50 in the group of specialists, so that the
responses of these individuals are scattered.
Existence of working groups: the experts in the analysis Delphi, have
rated this safeguard to 4.05, obtaining low dispersion and high consensus of
opinion.
Passage of time and changing circumstances: the position within the
ranking of safeguards to ensure the objectives ness of the internal auditor is
the issue11, the penultimate, with a score of 2.85 out of 5, with an unusual
safeguard and considered unimportant. However, scores granted by the 2
groups of experts on this safe- They saved are very different. While scores
specialists are concentrated among the values 3 and 4, scores from the
internal auditors are dispersed between the values 1 and 4.
Table 3
Kendall coefficient of concordance (organizational
independence)

AUDIT INDEPENDENCE AND OBJECTIVITY

N
W Kendall
Chisquare
df
Sig.
Asymptoti
c

22

Full
Sample
20
0.303
36.328

Sample
auditors
12
0.301
21.653

Sample
specialists
8
0.361
17342

5
0

5
0.001

5
0.008

Carrying out internal consultations: these queries have a punctuation,

not dispersed and consensual, 3.45 out of 5, standing in ninth place in the
ranking of importance.
Correct selection of the internal auditor: proper selection is a safeguard
assessed a 4.35 out of 5. This score is not dispersed and consensual, and is
located in second place in the ranking of importance within the objectivity.

Table 4
Kendall coefficient of concordance (objectivity of
the internal auditor)
Full
Sample
Sample
Sample auditors
specialists
N
20
12
8
W Kendall
0.488
0.527
0.515
Chi-square 107.32 69.623
45.28
2
df
11
11
11
Sig.
0.000
0.000
0.000
Asymptotic
Continuous training of internal auditor: the panel considers training as very
important the point 4.35 average situation. The standard deviation and show

AUDIT INDEPENDENCE AND OBJECTIVITY

23

no RI dispersion in the answers, and the RIR shows the existence of

consensus.
Table 5
Mann-Whitney U test. Comparison between the 2 groups in the
independence
Organizational Depende Independen Statut Appointment
Independence nce
ce activity
e
and removal
Mann-Whitney 30000
43000
4500 46500
0
Sig.
0.14
0.63
0.806 0.904
Asymptotic
(bilateral)

organizational
Quali
ty
4600
0
0.863

Meetin
gs
38000
0.36

Realization of supervision and double checks: this salvation Guardian is

valued by experts with 4.35. Must be note that dispersion was found in the
answers given by specialists to observe the RI, but not by observing the
deviation Typical.
Outsourcing the internal audit function: the externality of the internal
audit function is the worst safeguard experts evaluated by obtaining a value
of 1.90. This Psalm vanguard is highly concentrated and agreed in both
groups. However, the importance level is different between them, since
internal auditors assessed worse (1 to 2) specialists (2 to 4). This is due to
fact that internal auditors consider outsourcing as a threat to their profession
and their jobs. Regarding the proposals submitted the following are obtained
results:
Table 6
Mann-Whitney U test. Comparison between the 2 groups in objectivity
Objectivit
Responsibilit Rotatio Activity
Strong
Incentiv Workin
y
ies
n
12
organizational
es
g
Statement
months
governance
groups

AUDIT INDEPENDENCE AND OBJECTIVITY

24

MannWhitney
Sig.
Asymptoti
c
(bilateral)

41500

39000

40500

44500

28000

32500

0.587

0.449

0.514

0.775

0.103

0.138

Objectivit
y

Responsibilit
ies
Statement
37000

Rotatio Activity
n
12
months
35500 40000

Strong
organizational
governance
41500

Incentiv Workin
es
g
groups
30500
10000

0.367

0.295

0.579

0.139

MannWhitney
Sig.
Asymptoti
c
(bilateral)

0.495

0.002

The agreement between the experts' responses submitted Delphi

analysis was contained in Proposition 1: no consistency in the responses of
the experts. To contrast this proposition the concordance coefficient was
used Kendall. This coefficient is applied to the responses obtained for
organizational independence (Table 3) and objectivity Internal Auditor (Table
4) in each group of experts separately and together and in each round,
obtaining in all where p value of less than 5%. Thus, it may say that the
scores on the Delphi analysis are concordant.
Table 7
Variation of relative interquartile range after the second round for the
organizational independence
Organizational
Full Sample
Internal auditors
Specialists
Independence
1R
2R
VAR 1R
2R
VAR 1R
2R
Dependence
0.5
0.5
0
0.2
0.22 0.02 0.5
0.43
Independence of
activities

0.2

0.2

0.2

0.2

0.2

0.11

VAR
0.07
0.09

AUDIT INDEPENDENCE AND OBJECTIVITY

25

Statutes
Appointment and
removal
Quality

0.5
0.5

0.5
0.5

0
0

0.5
0.5

0.5
0.37

0.25
0.25

0.28
0.43

0.03
0.18

0.5

0
0.13
0.17

0.33

0.33

0.33

0.33

0.28

0.33

0.33

0.17

0.05
0.16

Meetings

0.33

0.33

0.33

The sample of experts was divided into 2 subgroups: the auditors or

implied internal and specialists. Contrast proposition made to test the
existence of subgroups Opinion intended to detect if there was a relationship
between opinion given and the fact of belonging to a group of experts in
concrete (Proposition 2: 2 samples from the same population). For this
statistical Mann-Whitney (Tables 5 was applied and 6). After the second
round, it can be said that only detected different opinions due to
membership in a group or another to safeguarding: outsourcing the internal
audit function.
As for the variation of opinion between a round and another (Proposition 3: there is no agreement in responses between the first and the
second round), the variation of the RIR (Tables 7 and 8) reflects certain These
changes in the consensus certain safeguards, although these variations are
not significant because, on one hand, are small, and secondly, consensus
existed in the first round, reaffirming the second. So we can say no strong
changes of opinion from one round to another and modified given produced
mild translate into greater consensus. Of Thus, Proposition 3 is rejected.
Table 8
Variation of relative interquartile range after the second round for objectivity

AUDIT INDEPENDENCE AND OBJECTIVITY

Organizational Independence

Full Sample

Strong organizational
governance
Incentives

1R
0.3
3
0.3
3
0.2
2
0.2
5
0.5

Working groups

Passage of time and changing

circumstances
Internal consultations

0.6
6
0.2
5
0.2
5
0.2
5
0.2
5
1

Statement of Responsibilities
Rotation
Activities 12 months

Selection
Training
Supervision
Outsourcing

26

2R
0.5
0.3
3
0.2
2
0.2
5
0.3
7
0
0.5
0.2
5
0.2
5
0.2
5
0.2
2
0.5

Internal
auditors
VAR 1R 2R
0.17 0.6 0.5
6
7
0
0.3 0.3
3
3
0
0.2 0.2

Specialists
VAR
0.09
0

0.5

0.5

0.2
0.13 5
0
0.2
5
1
0.16
0
0.2
5
0
0.2
5
0
0.2
5
0.2
0.03
-0.5 1

0.2
5
0.2
5
0.8

1R
0.3
3
0.3
3
0.2
5
0.2
5
0.3

-0.2

0.2
5
0.2
5
0.2
2
0.2

0.3
3
0.3
3
0.2

0.2
0.03 5
0
0.2
5
0
0.3
3

2R
0.3
3
0.3
3
0.2
5
0.2
5
0.3
3
0

VAR
0

0.33
0

0.3
3
0.2
2
0.2
5
0.5
0.4

0
0
0
0.03
0

0.02
0
0.25
0.07

AUDIT INDEPENDENCE AND OBJECTIVITY

27

Chapter Five
Discussion/Conclusion
First, as to the literature review investigation on, it becomes clear the
difference that the IIA performed, in its rules and recommendations between
the concepts of organizational independence and objectivity of the internal
auditor In order to ensure independent internal audit function and effective.
Furthermore, following approval of the final definition of internal audit
in 1999, and out of concern for having independent and objective functions,
little is still appreciated number of jobs, despite the slight increase, focusing
specifically in these 2 topics. In connection with work on the organizational
independence, we can highlight that focus primarily on the following issues:
dental unit audit committee for the organizational chart, meetings between
the committee audit and the head of internal audit, and finally appointed and
removal of the internal auditor by the committee. The results most studies
focusing on these issues have a large number of entities not implemented
recommendations on dependency and on appointment and removal. In
contrast, the number of meetings appears superior to recommended
minimum from the IIA, which is 4 encounters year.
The work focused on the objectivity of the internal auditor approach
can get an attention from the perspective of potential conflicts of interest
that might affect this quality, the most analyzed Zado the existence of
compensation plans. In this sense, the This work, by the fact discuss possible
strategies or objectivity safeguards that could avoid or reduce potential

AUDIT INDEPENDENCE AND OBJECTIVITY

28

conflicts of interest, represents an advance in knowledge and novel

contribution. Second, the empirical analysis through the Delphi method
shows that there is consistency between the responses experts subjected to
analysis for significance level 5%. It is also evident that there are different
views on the importance of safeguards, because membership of a group or
another expert. Just different opinion detected to safeguard outsourcing the
audit function internal. This is due to suspicion in the profession of internal
auditing to lose some or all of our plot of action, so the group internal
auditors considered significantly less this important safeguard to ensure
objectivity.
Finally, the objective of this research is to propose a relationship
safeguards to consider, in order to ensure organizational independence of
the audit function internal and objectivity of the internal auditor, who
ordered function of the importance of the experts gave them, are presented
below: Very important safeguards ratio, so that Companies must carry them
out:

Independence of the activities and control systems procedure.

No audit activities 12 months earlier.
Correct selection of the internal auditor. Continuous training of internal

auditor.
Monitoring and review before issuing the report. Unit nonexecutive

bodies.
Existence of statutory audit support function.
Existence of working groups.
Existence of incentives that motivate be objective.
Perform quality reviews of internal audit work.
Fill a statement of responsibilities to conflicts of interests.

AUDIT INDEPENDENCE AND OBJECTIVITY

Existence of a strong organizational governance.

Meetings with the audit committee.
Carrying out internal consultations on audit matters.
Appointment and dismissal of the internal auditor for non-executive

board.
Rotation of the internal auditor in office.

29

Relationship little or no safeguards considered important and whose

involvement does not have to guarantee the independence of the internal
audit function:

Passage of time and changing circumstances.

Outsourcing the function.
While conducting this research have different constraints. First,

regarding the subject should highlight the sensitivity. The expert 'auditor
internal 'should respond on issues related to their independence and
therefore related to their professional ethics. This One fact could lead to no
objective responses in the study. Second, with respect to the variables used,
there are safeguards that might not have been included in their limited
relevance analysis, such as time and changing circumstances. Proof of this is
the minor which was granted by those skilled in the Delphi analysis. Even
though outsourcing yields similar results, should be taken account for his
controversial deployment.
Furthermore, possible future lines exposed investigated that will enrich
and complete this work: 1) conduct depth analysis of the psychological
components that can affect the behavior of the individual to a potential
conflict interest from a psychological point of view; 2) analyze whether the

AUDIT INDEPENDENCE AND OBJECTIVITY

30

managerial discretion is influenced by the existence a function of strong and

independent internal audit, as internal control mechanism within a good
corporate governance, and 3) conduct a comparative study of safeguards to
independence of the internal audit function and safeguards the
independence of the external audit.

AUDIT INDEPENDENCE AND OBJECTIVITY

31

References
ET Section 100 - Independence, Integrity, and Objectivity
<www.aicpa.org >
Pickett 2011, The Essential Guide to Internal Auditing
Reding 2013 Internal Auditing: Assurance & Advisory Services, Third EditionJun 30,
by Kurt R.
Sarens, G., et al. (2009) Internal audit: A comfort provider to the audit committee,
The British Accounting Review, vol. 41, no. 2: 90106
Stewart, 2009. Internal audit independence and objectivity: a review of current
literature and opportunities for future research
Sarens, G. and De Beelde, I. (2006) Internal auditors' perception about their role in
risks Management. A comparison between US and Belgian companies,
Managerial Auditing
Journal, Emerald Group Publishing Limited, 21(1), pp. 63-80.
Zakaria 2014 A Step By Step Guide: How to Perform Risk Based Internal Auditing for
Internal Audit Beginners
Mefford 2014 Risk-Based Internal Audit
Moeller, 2009, Brink's Modern Internal Auditing: A Common Body of Knowledge
Cangemi 2013 Managing the Audit Function: A Corporate Audit Department
Procedures