An internal auditor believes that the internal audit activity's independence is impaired. Which of the following actions should the internal auditor take first?

Question

Options

• AReport the impairment to senior management
• BDiscuss the impairment with the audit manager
• CAscertain the best approach to disclose the impairment.
• DDecide on the extent of impact of the impairment

• A
  6% (2)
• B
  11% (4)
• C
  77% (27)
• D
  6% (2)

Explanation

Option C is correct because, per IIA Standard 1130, when independence is impaired, the auditor's primary obligation is disclosure - but before disclosing, the auditor must first determine the appropriate channel and manner of disclosure, since it depends on the nature and severity of the impairment (e.g., it may need to go to the audit committee, not just management).

Why the distractors are wrong:

• A (Report to senior management) jumps straight to action before determining whether senior management is even the right recipient - sometimes disclosure must go to the board or audit committee, especially if management is the source of the impairment.
• B (Discuss with audit manager) is too narrow and assumes the manager is uninvolved; if the manager is the cause of the impairment, this would be inappropriate as a first step.
• D (Decide on extent of impact) puts assessment before disclosure planning - the IIA standards prioritize transparency through proper disclosure, not internal impact analysis first.

Memory tip: Think "Plan the disclosure before making it." C is the only option that happens before any communication occurs - it's the meta-step that governs all subsequent actions. When in doubt on sequencing questions, the IIA framework favors structured decision-making over reactive reporting.

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