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CS Professional · Internal and Forensic Audit · Practices related to Internal Auditing

Midway through the year, Raghav Steels Ltd announces the acquisition of a new plant and a change of its ERP system. The Head of Internal Audit had approved a plan in April. What is the most appropriate action regarding the internal audit plan?

The plan should be revisited and updated, with Audit Committee approval, to reflect the new plant and ERP change. An audit plan is dynamic and must respond to significant changes in risk. Keeping it unchanged leaves new risks uncovered, and letting the auditee decide would compromise independence.

  1. ARevisit and update the plan, with Audit Committee approval, to reflect the changed risk profileCorrect
  2. BContinue with the April plan unchanged until next year
  3. CDrop all existing audits and audit only the new plant
  4. DLeave the decision to the plant manager of the new unit

Explanation

An internal audit plan is a living document and must respond to significant changes in business and risk. The revised plan should be communicated to and approved by the Audit Committee. Ignoring the change leaves new risks uncovered, while scrapping all audits is excessive and ignoring independence by leaving it to the auditee is improper.

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