Independence … and Objectivity …

23 Nov

I’d recommend the IIA to de-emphasize both in the definition of internal auditing, the dimensions of independence and objectiveness. Presently, the definition is quite aspirational, I think. So, I’d advocate a more realistic positioning which could help to further increase credibility in the eyes of key stakeholders.

(1) Independence – or get the boss right?
No doubt, independence per se is worth striving at. However, if we think about this, who actually is independent? According to Mutchler (2003) independence is defined as freedom from material conflicts of interest distinguishing “independence in appearance” and “independence in fact (often called independence of mind)”. The talk about “independence of mind” does not convince me. Does it convince you? – “There can be no such thing as complete independence” states Chambers (1992). I agree with him. It may be more important to clarify the reporting line and funding of the Internal Audit Function. The insights by the “Serving Two Masters” discussion are helpful here.

(2) Objectivity – is that a construct of mind?
This dimension refers to “how” internal auditors do their work. The ability to manage threats to objectivity, e.g., self-reviews, social pressure, economic interest or personal relationship or a combination thereof is according to Mutchler (2003) an important signal that internal audit activities can be relied upon to provide assurance. However, can there be such thing as complete objectivity? I don’t think so. What about limitations to the claimed “objectivity” as people when viewing the world are influenced consciously and unconsciously, e.g., by their genesis, inner beliefs, motivations, education and prior experience or as Schrödinger puts it, “every man’s world picture is and always remains a construct of his mind and cannot be proved to have any other existence” (Watzlawick, 1984). The study by Brody and Lowe (2000), for example, confirms that internal auditors are unable to be objective in “a realistic case scenario”. Internal Audit should not simply add another view. But It is rather a subjective perspective, after all, based on data.

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