The internal audit activity must be independent, and internal auditors must be objective in performing their work2. This means that they should not have any conflicts of interest or undue influence that could impair their judgment or credibility3. Therefore, the CAE should not assume any management responsibilities or roles that could compromise their independence or objectivity, such as the chief compliance officer4. Option B is the most appropriate alternative, as it preserves the separation of duties and accountability between the internal audit and compliance functions, while allowing the CAE to provide some guidance and oversight to the new chief compliance officer5.
The other options are not appropriate, as they would create potential impairments to the internal audit activity' s independence or objectivity. Option A would create a self-review threat, as the CAE would have to audit their own work in the compliance function. Option C would create a familiarity threat, as the CAE would have a close relationship with the external auditor who would audit their work in the compliance function.
Option D would create a role conflict, as the CAE would have to balance the conflicting objectives and expectations of the internal audit and compliance functions.