The chief audit executive (CAE) should recommend that the executive attend the event but decline the offer to use the luxury vehicle. This advice maintains the executive's ability to participate in relevant business activities while avoiding activities that might appear to compromise his integrity or the organization's standards of ethical conduct. References: IIA's Code of Ethics and standard guidance on conflicts of interest and the acceptance of gifts.

The true statement with regard to the quality assurance and improvement program (QAIP) is that the internal audit activity needs to assess whether each engagement on the annual internal audit plan is conducted in conformance with the Standards. This assessment is part of the ongoing monitoring of the internal audit activity's performance, ensuring adherence to the IIA's Standards for the Professional Practice of Internal Auditing.
The IIA's International Standards for the Professional Practice of Internal Auditing, specifically those pertaining to quality assurance and improvement.

The internal audit activity must align its activities with the organization's risks. Not considering high-risk development projects in the audit plan could indicate nonconformance with the Standards, specifically regarding risk-based planning. The Standards require internal audit to consider all significant risks when developing the audit plan, and failing to do so may require disclosure of nonconformance. References: The IIA's International Standards for the Professional Practice of Internal Auditing (Standards), specifically Standard 2010 - Planning, and Standard 1300 - Quality Assurance and Improvement Program.

To promote organizational independence for the internal audit activity, the audit committee should approve the annual budget and resource plan for the internal audit activity. This action ensures that the internal audit has sufficient resources to independently carry out its mandate without undue influence from management.
IIA guidance and standards concerning the role of the audit committee in supporting the independence and resources of the internal audit function.

The internal audit activity's independence is impaired if the chief audit executive (CAE) is involved in developing controls, as this constitutes a management function. According to IIA standards, internal auditors must remain independent and objective, avoiding roles that involve direct management responsibilities.
Developing specific controls prompted by a new regulatory requirement blurs the lines between management and audit functions, impairing the ability of the internal audit activity to later provide an objective assessment of those controls.
IIA Standard 1112: Chief Audit Executive Roles Beyond Internal Auditing IIA Standard 1100: Independence and Objectivity