Independence and Objectivity Are Not the Same Thing

Richard Chambers, CIA, CGAP, CCSA, CRMA, shares his personal reflections and insights on the internal audit profession. 

 

After taking the opportunity with my last blog to focus on acquiring and retaining internal audit talent, I return in this blog with the final installment in a three-part series on the core attributes of an internal auditor. In each of these blogs, I have examined some of our attribute standards that we all proactively abide by.

While many, including The IIA, have made numerous efforts to distinguish between the terms, there remains a lot of confusion around the words “independence” and “objectivity” as it relates to a practicing internal auditor. These words are not synonymous, nor are they interchangeable. It is possible for someone to be independent but not objective, and it is equally possible for someone to be objective without being independent.

I often hear people say that internal auditors should be independent. This can be misleading. Internal auditors are not independent of the organizations they serve, but the internal audit activity should be organizationally independent of the areas it must audit. While not necessarily personally independent, internal auditors should nonetheless always strive to be fully objective in carrying out their work. That’s the essence of Attribute Standard 1100: Independence and Objectivity, and that’s the focus of this blog entry.

Standard 1100 states: “The internal audit activity must be independent and internal auditors must be objective in performing their work.”

Employee or contractor, either way, internal auditors depend on the companies or institutions that pay them. Dependence, however, does not preclude objectivity.

Independence, in this case, refers to the freedom to conduct audit activities in an unbiased manner, and how important it is for chief audit executives to have direct and unrestricted access to senior management and the board. Factors affecting independence are primarily structural and pertain to how high in the organization the internal audit function reports.

Objectivity is an unbiased mental attitude that allows internal auditors to go into an engagement with no preconceived notion of what they are going to find, and to perform their work without compromise. Attribute Standard 1120: Individual Objectivity covers this well by stating, “Internal auditors must have an impartial, unbiased attitude and avoid any conflict of interest.”

Factors affecting objectivity are more varied. They include social pressure, economic interests, personal relationships, racial and gender bias, familiarity, cognitive bias, self-review, and intimidation, among other factors.

One might think that the biggest challenge for auditors in meeting these standards would be overcoming any built-in bias that comes from dependency. In my career, I’ve found that the opposite is often true. Too often, internal auditors go into an engagement assuming that management has something to hide.

Granted “management” in this case would be the operational managers within the area being audited, not senior managers. But this negative bias is doubly non-productive because it can not only unfairly skew recommendations, but also break relationship fences that may be hard to mend later. And as I’ve said before, you can’t afford to have too many broken fences.

Objectivity is fundamental to what internal auditors do — so much so that it is also one of four key principles in The IIA’s Code of Ethics (PDF).

The IIA has developed a Practice Guide on independence and objectivity that delves into these areas far deeper than this space allows. I highly recommend giving it a read if you haven’t looked at it in a while.

How do you preserve independence and promote objectivity? As always, I welcome your thoughts. 

Posted on Oct 30, 2013 by Richard Chambers

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  1. Great blog.

    I totally agree with your statement on how the higher the IA function reports in the organization, the more it can preserve its independance. Empowrment by the audit committee and the BOD can serve in a significant way. Management will often try to interfer in the work of the IA team. It is how well supported the IA function is by the BOD and the Audit Committee that determines how successful management may be in hindering the work of internal auditors.

  1.  Richard thank you for this summary.  Live and breath this every day.

  1. The common misconception is that auditors should act independent from anybody, including those who appoint them, which just can not happen.

  1. You raise interesting points, Richard, particularly about the internal audit activity being organizationally independent of the areas that it must audit.

    The IIA Research Foundation has a research report that is due for release in 2013 on this very topic (Independence and Objectivity). The report is titled "Factors That Affect Internal Audit Objectivity and Job Satisfaction: What Every Manager Needs to Know."  I'd be glad to send you the report after it's edited.

     

  1. Richard, you never cease to impress me with your brilliance. You have been my "American Idol" since the time you were President of the American Society of Military Comptrollers, Fort McPherson, Georgia, and I served as your Secretary. You are blessed with the X Factor, and I am so pleased that your expertise is internal auditing because I firmly believe that management has plenty to hide.
  1.  Richard

    Objectivity lies on how internal auditors apply their intellectual honest in making recommendations to the management and the AC,  some of which may not necesssarily be popular to individuals we depend onin the organisation.

    I fully agree with you that we are not independent of organasations we serve, either as employee or contractor, because they pay us for what we do and this is what makes us survive. This is always an areas where internal auditors have huge exposure when some hot issues need to be put on the table for discussion. More than often , their intellectual honest is impaired becuase of the fear of survival.

    Is only internal auditors who have courage and fall back position who can do that/

  1.  Richard

    Objectivity lies on how internal auditors apply their intellectual honest in making recommendations to the management and the AC,  some of which may not necesssarily be popular to individuals we depend on in the organisation.

    I fully agree with you that we are not independent of organasations we serve, either as employee or contractor, because they pay us for what we do and this is what makes us survive. This is always an areas where internal auditors have huge exposure when some hot issues need to be put on the table for discussion. More than often , their intellectual honest is impaired becuase of the fear of survival.

    Is only internal auditors who have courage and fall back position can do that,

  1.  Hello M. Richard , 

    I very happy to read your message telling objectivity and independance.

    I'd like to know, if you'll chose between Objectivity and Independance, What'd be your position ?

    Excuz me if i do many false for righting enlish, I' m a french speaker.

    Thanks, 

    Papa Amadou Mbaye 

    IIA Senegal, West Africa

     

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