The Performance Standards address the management of the internal audit function

The performance standards address the management of

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necessary attributes of the audit function (or team). The Performance Standards address the management of the internal audit function, the nature of internal audit work, and the performance of the specific engagement. 4.The participation of the CAE in a company’s stock option plan is not typically considered to be a situation that would impair his or her objectivity. The rationale is that such participation should not create a conflict between the interests of the organization and the duties of the CAE in the long run.
CHAPTER 2 THE INTERNATIONAL PROFESSIONAL PRACTICES FRAMEWORK: AUTHORITATIVE GUIDANCE FOR THE INTERNAL AUDIT PROFESSION Illustrative Solutions Internal Auditing: Assurance and Consulting Services, 2ndEdition. © 2009 by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue, Altamonte Springs, FL 32701 USA IS2-6 Recent surveys indicate that a large percentage of CAEs currently receive stock options as part of their compensation package. However, it could be argued that short-term conflicts of interest could occur. For example, the CAE may have incentive to delay disclosing bad news about the company to the board until the options are exercised. This question has been debated more frequently in recent years and the authors believe the trend may move toward removing stock options from CAEs’ compensation packages. 5.a. In this situation, the internal auditors are performing the actual accounting function for the organization. Making the accounting entries should be the responsibility of accounting. In doing this work, the internal auditor’s objectivity would be considered impaired. b.The internal auditor is not performing the independent verification control of reconciling the monthly bank statements; this is being done by a staff accountant. The internal auditor is testing whether the control is operating effectively, which is an appropriate internal audit task. Accordingly, the internal auditor’s objectivity would not be considered impaired. 6.a. “Providing a formal, written internal audit charter is critical in managing the internal audit activity. The internal audit charter provides a recognized statement for review and acceptance by management and for approval, as documented in the minutes, by the board. It also facilitates a periodic assessment of the adequacy of the internal audit activity’s purpose, authority, and responsibility, which establishes the role of the internal audit activity. If a question should arise, the internal audit charter provides a formal, written agreement with management and the board about the organization’s internal audit activity.” b.The internal audit charter should clearly define the internal audit activity’s purpose, authority, and responsibility. 7.a. Relevant standards include: 1210: Proficiency. This standard states that “Internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities. The internal audit activity collectively must possess or obtain the knowledge, skills, and other

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