Learn what makes an effective audit objective when evaluating the governance processes of an organization, based on expert guidance for the IIA CIA Part 2 certification exam.
Table of Contents
Question
Which of the following is an appropriate engagement objective for an upcoming audit of the organization’s governance system?
A. Assess the design, implementation, and effectiveness of the organization’s ethics program.
B. Assess the completeness and accuracy of the management letter section of the organization’s annual report.
C. Assess whether privacy controls over a client’s personally identifiable information are in compliance with state regulations.
D. Assess the accuracy of calculations and timeliness of tax payments to the government.
Answer
The most appropriate engagement objective for an upcoming audit of the organization’s governance system is:
A. Assess the design, implementation, and effectiveness of the organization’s ethics program.
Explanation
An organization’s governance system encompasses the processes, policies, and structures that guide how the organization is directed and controlled in order to achieve its objectives. A key element of effective governance is establishing and maintaining an ethical culture. Therefore, assessing the organization’s ethics program is directly relevant to evaluating governance.
An ethics program audit objective would examine areas such as:
- Whether a code of conduct/ethics policy is in place and communicated to all employees
- If there are channels for reporting ethical violations and whistleblower protections
- How well ethics training is implemented
- The process for handling ethics complaints and violations
- Tone at the top and ethical leadership from senior management and the board
- Alignment of incentives and performance management with ethical behaviors
The other answer choices, while valid audit objectives, are not as directly tied to governance:
B) Reviewing the management letter for completeness and accuracy is more about financial reporting than governance.
C) Compliance with privacy regulations, while important, is a more narrow IT/security objective rather than holistically looking at governance.
D) Verifying tax payment accuracy is a financial compliance issue, not directly related to overall governance processes.
In summary, answer A is correct because systematically auditing the ethics program provides valuable insight into the effectiveness of the organization’s governance in setting standards of conduct and fostering an ethical culture. The ethics program is a foundational element of the overall governance system.
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