Which of the following offers the feast evidence that the internal audit activity has achieved organizational independence?

Question

Options

• AAn independent third party has assessed the organization's system of internal controls to be
• BThe chief audit executive reports both functionally and administratively to the CEO.
• CThe internal audit charter is drafted properly and approved by the appropriate parties.
• DThe mission statement and strategy of the internal audit activity demonstrates alignment to

• A
  2% (1)
• B
  14% (6)
• C
  77% (33)
• D
  7% (3)

Explanation

An approved internal audit charter is the strongest evidence of organizational independence because the charter formally establishes the internal audit activity's authority, scope, and reporting relationships - and its approval by the board or audit committee signals that governing bodies have sanctioned that independence at the highest level.

Why the distractors fall short:

• A is wrong because a third-party assessment of internal controls measures control effectiveness, not the independence of the audit function itself.
• B is wrong because reporting to the CEO is administrative reporting - functional independence requires reporting to the board/audit committee, not the CEO; this structure actually undermines independence.
• D is wrong because a mission statement demonstrates intent and alignment, not a formal, approved grant of independence - documents can be aspirational without being authoritative.

Memory tip: Think of the charter as the internal audit activity's "constitution" - just as a constitution establishes and protects institutional independence, only the charter is a formally approved governing document that grants and evidences independence. If it's not in the charter, it's not official.

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