Choice "C" is correct. The organizational structure principle says that reporting relationships should not undermine the commitment to effective financial reporting and internal control. Maintaining reporting independence of the internal auditor is one way to apply this principle.
Choice "b" is incorrect. The Board of Directors' principle says that the board should be actively involved in overseeing the implementation of both financial reporting and internal controls. The principle relates more to leadership than to reporting relationships.
Choice "d" is incorrect. The authority and responsibility principle says that authority and responsibility should be delegated to individuals within the organizational structure as appropriate to maintain effective internal controls. The authority and responsibility of individuals can be undermined by flaws in the organizational structure.
Choice "a" is incorrect. The human resources principle says that human resources policies and procedures should be fully compatible with effective financial reporting and internal control. Competence, not reporting structures is emphasized by this principle.