IIA IIA-CIA-Part1 Based on Real Exam Environment

A significant threat to internal audit objectivity arises when the chief audit executive reports directly to the chief financial officer, especially if the CFO previously led the internal audit activity. This reporting relationship can undermine the independence necessary for objective audits, as the CFO might influence the scope or outcome of audit engagements to suit certain financial reporting outcomes or to cover previous decisions made while in charge of internal audit.References: The IIA's International Standards for the Professional Practice of Internal Auditing on independence and objectivity.

If there are unresolved scope restrictions, the chief audit executive (CAE) should consider whether to pursue the audit and note the scope restrictions in the audit report. This is important because scope restrictions can limit the audit’s ability to fully assess the control environment, and documenting these limitations helps ensure that the audit report reflects the extent to which the auditor was able to evaluate the control environment.References: The IIA's International Standards for the Professional Practice of Internal Auditing regarding scope limitations and reporting.

The IIA's Standards require that an external assessment of an organization's internal audit activity must be conducted at least once every five years. Option A is the only acceptable approach listed that aligns with these standards. It involves conducting a self-assessment with independent validation by a qualified and experienced internal auditor, followed by scheduling an external assessor who is also qualified and independent. This process ensures compliance with the IIA’s requirement for external assessments, maintaining both the credibility and objectivity of the internal audit activity.References: The Institute of Internal Auditors (IIA) - Standards for the Professional Practice of Internal Auditing

The personnel development practice applied in this situation is 'outbound rotation.' This practice involves temporarily assigning staff from their usual roles into other departments or functions within the organization to gain a deeper understanding and knowledge of those areas. In this case, the internal auditor working in the procurement department to learn about the procurement process is a classic example of an outbound rotation.References: Human resources management practices and IIA guidelines on staff development