Independence and Objectivity”

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  • #207852

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    This forum is restricted to members of the associated course(s).

    Shahnaz Parekh
    Participant

    Hi Brian,
    As part of a company-sponsored award program, an internal auditor was offered an award of significant monetary value by a division in recognition of the cost savings that resulted from the auditor’s recommendations. According to the International Professional Practices Framework, what is the most appropriate action for the auditor to take?
    A. Decline the gift and advise the division manager’s superior.
    Answer (A) is incorrect.
    Declining the gift and advising the division manager’s superior could erode the audit function’s relationship with the division in question. The auditor should inform and consult audit management for guidance.
    B. Accept the award under the condition that any proceeds go to charity.
    C. Accept the gift because the engagement is already concluded and the report issued.
    D. Inform audit management and ask for direction on whether to accept the gift.

    My question is why A is an incorrect answer when an auditor is not supposed to accept any significant monetary value why the auditor need to inform the audit manager.

    Thanks in advance
    Shahnaz

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  • #207875

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    Brian Hock
    HOCK international

    Hello, Shahnaz,

    A couple of ways of looking at this question:

    1) Even if they will not accept the gift, in the spirit of client relationships, it is probably not best for the internal auditor to immediately refuse the gift. So, it is best to inform management and let management deal with it if it is in fact not going to be accepted. So, that makes D a better answer than A.

    2) I am not sure that internal auditors have the same strict restrictions on gifts as external auditors because there is not the same independence issues for internal auditors that there are for external auditors. And since it states that this is part of a company-sponsored award program, it is more likely that the internal auditor would be able to accept it since it is like a performance bonus more than a potential bribe from the audit client.

    So, for both of these, D is a better choice than A.

    Brian

    #207893

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    Shahnaz Parekh
    Participant

    Thank you so much for the explanation.

    #207894

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    Brian Hock
    HOCK international

    My pleasure.

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