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CS Professional · Internal and Forensic Audit · Special Points relating to Internal Audit in various Entities

Under a risk-based internal audit plan for Lakshmi Housing Credit NBFC, which branch should ordinarily be audited first and more frequently?

The branch with high disbursements, rising delinquencies and repeated earlier observations should be audited first and more often. Risk-based internal audit directs effort to areas of greatest exposure, rather than selecting branches alphabetically, by convenience or because they have clean records.

  1. AA branch with high disbursements, rising delinquencies and repeated earlier audit observationsCorrect
  2. BA branch with low volume, no delinquencies and clean earlier audits
  3. CA branch chosen alphabetically
  4. DA branch nearest to the head office

Explanation

Risk-based planning allocates audit effort in proportion to risk indicators such as volume, delinquencies and past findings. Low-risk branches get less frequent coverage. Alphabetical or proximity-based selection ignores risk.

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