According to IIA guidance, which of the following individuals would best be considered independent for the purpose of participating in an external assessment of the quality assurance and improvement program for an internal audit activity (IAA)?

According to IIA Standard 1312, external assessments must be conducted by a qualified, independent assessor from outside the organization. An independent assessor must be free from any real or apparent conflict of interest. A former employee who has been separated from the organization for a sufficient period (three years is generally considered adequate) is deemed to have mitigated the familiarity and self-interest threats to their independence. Their prior knowledge of the internal audit activity (IAA) is actually a benefit, provided their objectivity is not impaired by the previous relationship. The other options present clear conflicts of interest that would impair independence.

B. An employee of a co-sourcing provider has a direct financial and professional relationship with the IAA, creating a significant conflict of interest and impairing independence.
C. An employee of an affiliated organization is not considered "outside the organization" for the purposes of an external assessment, as their objectivity could be compromised by inter-company relationships.
D. An employee of the parent organization is not external to the overall entity and is therefore not independent due to the direct control and reporting relationship. ---

1. The Institute of Internal Auditors (IIA), International Standards for the Professional Practice of Internal Auditing (Standards), January 2017.

Standard 1312: External Assessments: "External assessments must be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organization."

Implementation Guide 1312: External Assessments: This guide clarifies that an independent assessor "must be free from any obligation to, or interest in, the organization whose internal audit activity is being assessed." It explicitly states that a conflict of interest may arise from "present or past relationships with the organization or its internal audit activity." While past employment is a factor, a sufficient time lapse can mitigate this conflict, making it a more viable option than the others presented.

2. The Institute of Internal Auditors (IIA), Practice Guide: Quality Assurance and Improvement Program, July 2020.

Section: "Selecting a Qualified Independent Assessor or Assessment Team" (p. 21-22): The guide discusses independence in detail. It states, "To be considered independent, the assessor should not be an employee of the organization, its parent, or an affiliate... An external assessor or assessment team is not independent if a real or apparent conflict of interest exists. A conflict of interest is a situation in which an internal auditor, who is in a position of trust, has a competing professional or personal interest... Examples of conflicts of interest include... providing other services to the organization (e.g., co-sourcing)." This directly disqualifies options B, C, and D. It also notes that a former employee may be considered independent if a "reasonable period of time has elapsed."