While Preparing the Annual Audit Plan, the Newly Assigned Chief

question 64

Multiple Choice

While preparing the annual audit plan, the newly assigned chief audit executive (CAE) learns that the organization has not yet implemented a risk framework. Which of the following would be the most appropriate action for the CAE to take regarding potential engagements?

• A) Prioritize the engagements that were not done in previous years and schedule them for the upcoming year.
• B) Consult with senior management and the board and make adjustments regarding risk.
• C) Review all outstanding recommendations from prior audit engagements and focus on them in the upcoming year.
• D) Use the previous three-year audit plan to extrapolate potential engagements for the upcoming year's schedule of engagement.

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the budgeted cost of labor at the standard rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost accounting.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on the predetermined rate.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and included in the direct costs of production.