To add on, the first threat of independence caused by internal audit functions refers to the well –known practice of using the internal audit function as a training ground and stepping stones for future managers. Although there are many arguments supporting this practice, it can be argued that internal auditors will not be able to objectively and independently when they are dependent on the auditors for future career moves. The second threat identified refers to the approval of the internal audit budget. Imposing budget constrains is a powerful tool with which management can reduce the scope and impact of the internal audit function. The third threat relates to senior management being heavily involved in developing the internal audit plan .
while senior management s input is essential for setting internal audit priorities, the audit committee should monitor the impact of senior managements input . if their requests are considered unconditional priorities, internal auditors are viewed as management consultants, which invariably threaten the independence of the internal audit function. However, the threat caused by audit committee may differ from the once caused by the internal audit. The first threat relates to non-compliance with best practices recommending the internal audit function to report functionally to the audit committee and administratively to the CEO. It was found that this practice is not applied consistently and, hence, can be considered a potential independence threat.
The second indirect threat relates to the composition of the audit committee. While it was identified that