According to IIA guidance, risk assessment is a critical step that precedes the development of audit engagement objectives. The risk assessment process helps internal auditors identify the key areas of risk within the organization, which then informs the setting of appropriate objectives for the audit engagement.
* IIA Standard 2201 - Planning Considerations:
* This standard requires internal auditors to consider risk when planning an engagement. The risk assessment process identifies the areas of highest risk, which allows the auditor to focus on the most critical issues during the engagement.
* Role of Risk Assessment:
* By assessing risks, the auditor can determine which processes or controls are most likely to affect the achievement of the organization's objectives. This understanding is essential for setting the audit engagement's objectives, ensuring that they are aligned with the areas of greatest concern.
* IIA Practice Advisory 2210.A1-1:
* The advisory suggests that auditors should use the results of the risk assessment to establish the scope, objectives, and priorities of the engagement. Without this risk assessment, the audit objectives may not fully address the most significant risks.
* Option A (Identification of controls): This typically occurs after the objectives are set, as controls are evaluated based on the identified risks.
* Option B (Scope establishment): The scope is determined after the objectives are set, which are based on the risk assessment.
* Option D (Review of resources): This step is related to the allocation of resources after the objectives and scope are defined.
Detailed Explanation:Why Not Other Options?

The five-attribute approach to documenting deficiencies typically includes the following attributes: condition (the current state or issue identified), cause (the reason for the condition), effect (the impact or potential impact of the condition), and recommendation (suggested actions to address the deficiency). These attributes provide a comprehensive framework for understanding the deficiency, its implications, and the steps needed to rectify it, ensuring clear and actionable audit findings.
The Institute of Internal Auditors (IIA) - Practice Guide: Documenting Information

According to the Institute of Internal Auditors (IIA) guidance, the independence and objectivity of the internal audit function are fundamental principles. Independence is compromised if the internal audit function takes on roles or responsibilities that are part of management's duties. Coordinating and managing the risk management process is a management responsibility. If internal auditors assume this role, it impairs their ability to remain independent and objective when auditing the effectiveness of the risk management process.
References: IIA Standard 1112 - Chief Audit Executive Roles Beyond Internal Auditing

A cause-based recommendation aims to address the root cause of an issue to prevent its recurrence. By recommending the removal of inappropriate user access, the audit report is identifying the underlying problem (the granting of inappropriate access) and suggesting a solution that will help prevent this issue from happening again. This type of recommendation is focused on mitigating risks by addressing their causes, thereby strengthening the control environment.
The Institute of Internal Auditors (IIA), Practice Guide on Writing Audit Reports
"Internal Auditing: Assurance and Advisory Services" by Urton L. Anderson et al.

To test the theory that shutdowns are occurring due to outdated purchasing requirements that have not been updated for changes in production techniques, the auditor should compare the parts needed based on the most current production estimates and the revised materials requirements plan (MRP) with the purchase orders generated from the system. This comparison will help identify discrepancies between what is needed and what is being ordered, highlighting whether the system is failing to update purchasing requirements correctly. This method directly addresses the suspected cause of the shutdowns and provides clear evidence for or against the auditor's theory.
Institute of Internal Auditors (IIA), International Standards for the Professional Practice of Internal Auditing (Standards), Standard 2310 - Identifying Information.