Organizational Independence and Individual Objectivity: A Matter of Transparency

The Royal Government of Bhutan has issued new internal audit standards to promote transparency and accountability. These standards emphasize the importance of organizational independence and individual objectivity in the conduct of internal audits.

Key Requirements

• Internal auditors must refrain from assessing specific operations for which they were previously responsible.
• If an internal auditor provides assurance services for an activity over which they had responsibility within the previous year, their objectivity is presumed to be impaired.
• Assurance engagements for functions over which the chief audit executive has responsibility must be overseen by a party outside the internal audit activity.
• Internal auditors may provide consulting services relating to operations for which they had previous responsibilities, but only if the nature of the consulting did not impair objectivity and individual objectivity is managed when assigning resources to the engagement.

Transparency

In cases where internal auditors have potential impairments to independence or objectivity, disclosure must be made to the engagement client prior to accepting the engagement. This ensures that stakeholders are aware of any potential conflicts of interest.

Proficiency and Due Professional Care

• Engagements must be performed with the knowledge, skills, and other competencies needed to perform individual responsibilities.
• Internal auditors must possess sufficient knowledge of key information technology risks and controls and available technology-based audit techniques.
• The chief audit executive is responsible for ensuring that internal auditors have the necessary knowledge, skills, and other competencies to perform their responsibilities.

Implications

The new standards are expected to:

• Enhance transparency and accountability in the conduct of internal audits in Bhutan.
• Ensure that internal audits are conducted with integrity and professionalism by emphasizing organizational independence and individual objectivity.
• Recognize the importance of proficiency and due professional care in the conduct of internal audits, ensuring effective and efficient audits.

Conclusion

The new standards are an important step towards promoting transparency and accountability in Bhutan’s public sector. By emphasizing the importance of organizational independence, individual objectivity, proficiency, and due professional care, these standards will help to ensure that internal audits are conducted with integrity and professionalism.