Answer (D) is correct . The audit committee consists of outside directors who are independent of management. Its purpose is to help keep external and internal auditors independent of management and to assure that the directors are exercising due care. This committee selects the external auditors, reviews their overall audit plan, examines the results of external and internal auditing engagements, meets regularly with the chief audit executive, and reviews the internal audit activity’s engagement work schedule, staffing plan, and financial budget. Engagements may be performed in the vice president’s area of responsibility. Thus, (s)he is not independent of the internal audit activity. The vice president is also not an outside director.
Answer (A) is incorrect because The vice president of the local bank used by the organization is an external party who is usually independent of the organization’s internal operations.
Answer (B) is incorrect because An academic specializing in business administration is an external party who is usually independent of the organization’s internal operations.
Answer (C) is incorrect because A retired executive of a firm that had been associated with the organization is an external party who is usually independent of the organization’s internal operations.
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