You have been assigned the role of lead internal auditor. Your task is to carry out the annual assessment of the production line maintenance…

The planning stage of an internal audit is foundational and involves establishing the scope, objectives, and approach. A critical first step is to learn all about the systems and controls in the department being audited (D) to understand the operating environment and identify potential risks. Auditors must also review previous audit findings (F) to identify recurring issues, assess the implementation of past recommendations, and inform the current risk assessment. Based on this preliminary understanding and risk analysis, the auditor then develops a detailed audit program, which includes deciding how the controls will be tested (C) during the fieldwork phase. These activities are essential for a focused and efficient audit.

A. Prepare the report: This is a final activity performed during the reporting stage, after all fieldwork and analysis are complete.

B. Establish whether the controls are adequate or not: This is the conclusion of the audit, determined during the evaluation and reporting stages after testing is complete.

E. Carefully consider any control weaknesses that are reported: This occurs during the evaluation phase of the audit, after testing has identified potential weaknesses.

1. The Institute of Internal Auditors (IIA), International Professional Practices Framework (IPPF), 2017.

Standard 2201 – Planning Considerations: "In planning the engagement, internal auditors must consider... The results of prior engagements." (Supports option F).

Standard 2201.A1: "When planning an engagement for parties outside the organization, internal auditors must establish a written understanding with them about objectives, scope, respective responsibilities, and other expectations... This understanding must include the engagement client’s governance, risk management, and control processes." (Supports the principle of understanding the systems and controls, option D).

Standard 2240 – Engagement Work Program: "Internal auditors must develop and document a work program that achieves the engagement objectives. The work program must include the procedures for identifying, analyzing, evaluating, and documenting information during the engagement." (Directly supports deciding how controls will be tested, option C).

2. Arens, A. A., Elder, R. J., & Beasley, M. S. (2017). Auditing and Assurance Services (16th ed.). Pearson Education.

Chapter 8, "Audit Planning and Analytical Procedures," pp. 220-224: This chapter details the initial planning phase, which includes obtaining an understanding of the client's business and industry (supporting D), assessing client business risk, and reviewing prior period information (supporting F). The chapter further explains that this understanding is used to develop the overall audit strategy and audit program, which outlines the nature, timing, and extent of audit tests (supporting C).

3. Chambers, A., & Odar, M. (2015). A new vision for internal audit. Managerial Auditing Journal, 30(1), pp. 34-55. https://doi.org/10.1108/MAJ-07-2014-1060

Section: "The Internal Audit Process," p. 38: The article describes the typical internal audit process, starting with planning. It states, "The planning phase includes understanding the auditee, identifying risks and controls, and preparing the audit program." This statement directly corroborates the necessity of understanding the systems (D), and preparing the audit program which includes test design (C). Reviewing past work (F) is an implicit part of understanding the auditee and identifying risks.