IIA-CIA-PART1 · Question #32
A chief audit executive (CAE) was asked by senior management to establish and manage a risk management function. A new chief risk officer was hired a year later to assume these responsibilities. As…
The correct answer is C. Familiarity threat. Familiarity threat (C) is correct because the CAE previously established and managed the risk management function, creating deep insider knowledge of its people, processes, and design. This close involvement compromises the objectivity needed to independently assess the same…
Question
A chief audit executive (CAE) was asked by senior management to establish and manage a risk management function. A new chief risk officer was hired a year later to assume these responsibilities. As this function was included in the current annual audit plan, the CAE engaged an external resource for a risk management engagement. Which of the following potential threats to objectivity was the CAE likely addressing?
Options
- ASelf-review threat.
- BAdvocacy threat.
- CFamiliarity threat.
- DPersonal relationship threat.
How the community answered
(55 responses)- A5% (3)
- B4% (2)
- C75% (41)
- D16% (9)
Explanation
Familiarity threat (C) is correct because the CAE previously established and managed the risk management function, creating deep insider knowledge of its people, processes, and design. This close involvement compromises the objectivity needed to independently assess the same function - the CAE's prior management role means they are too "close" to the subject to audit it impartially, so an external resource was engaged instead.
Why the distractors are wrong:
- A (Self-review): Self-review applies when an auditor assesses the outputs of their own prior work product directly - here, a new CRO has operated the function for a year, so the current processes are no longer exclusively the CAE's creation.
- B (Advocacy): This threat arises when an auditor promotes an organization's position (e.g., to regulators), which isn't present in this scenario.
- D (Personal relationship): This stems from a personal or social bond with an auditee (friendship, family), not from a former professional management role.
Memory tip: Think "FAMILIARITY = former involvement." If an auditor ran the function before, they know it too well - like letting a former coach referee their old team's game. The fix is to bring in an outsider.
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