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CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

Kaveri Retail Ltd.'s internal audit head redesigns the annual plan so that stores with the highest inventory write-offs, weakest controls and highest sales value are audited more often than low-risk stores, instead of visiting every store once a year. Which approach does this represent?

This is the risk-based internal audit approach. Audit frequency and effort are prioritised toward stores with higher inventory losses, weaker controls and larger value exposure, rather than giving every store equal uniform coverage under a fixed rotational cycle.

  1. ARisk-based internal audit approachCorrect
  2. BRoutine cycle-based audit approach
  3. CContinuous audit with no prioritisation
  4. DSurprise audit approach only

Explanation

Allocating audit effort according to the level of risk, such as past losses, control weaknesses and value at stake, is the risk-based approach. Visiting every store once a year would be a uniform cycle approach, which the head is moving away from.

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