Which of the following scenarios represents an impairment to the independence of the internal audit...

Management approval of the internal audit budget can impair organizational independence because control over resources may give management the ability to restrict audit coverage, staffing, technology, expertise, or other capabilities needed to fulfill the audit mandate. Internal Audit Fundamentals guidance emphasizes board approval of the internal audit budget and resource plan as an important safeguard supporting organizational independence. A close family relationship primarily creates an individual objectivity concern that should be disclosed and appropriately managed. Providing advice regarding software controls can be permissible as an advisory activity when management retains responsibility for design and implementation. Stock-based compensation may also create objectivity concerns depending on circumstances, but it does not represent the clearest organizational independence issue presented. Therefore, management control over internal audit’s budget makes option B the correct answer.