According to internal auditing standards, what must internal auditors evaluate?

Internal auditors are mandated by auditing standards to evaluate the potential for occurrence of fraud within an organization. This is crucial for several reasons. First, internal auditors play a key role in assessing and improving the effectiveness of risk management, control, and governance processes. By identifying and analyzing the risks of fraud, they help ensure that adequate controls are in place to mitigate those risks, which is essential for maintaining the integrity of financial reporting and the organization's operations.

Evaluating the potential for fraud also aligns with the idea of promoting an ethical environment and accountability throughout the organization. By proactively identifying vulnerabilities and areas where fraud may be likely to occur, auditors can provide recommendations for enhancements to internal controls and processes. This assessment is not only about finding problems but also about fostering an atmosphere of awareness and prevention, which is beneficial for the organization as a whole.

The other options, while they may be relevant to the overall context of an organization's operations, are not specifically required evaluations under internal auditing standards in the same way that assessing fraud potential is. Economic conditions may impact overall strategy, profitability reflects performance outcomes, and employee attitudes can indicate organizational health, but these factors do not directly correspond to internal auditors' fundamental responsibilities regarding fraud risk assessment.