Question

The chief operating officer (COO) has requested that the internal audit function

advise her regarding a new incentive plan being developed for sales
representatives. Which of the following tasks should the CAE decline with
respect to providing advice to the COO?

a. Researching and benchmarking incentive plans provided by other
companies in the industry.
b. Determining the appropriate bonus formula for inclusion in the plan.
c. Recommending monitoring procedures so that appropriate amounts are paid
under the plan.
d. Determining how to best document the support for amounts paid to provide
a sufficient audit trail.

Answer 1

The Chief Audit Executive (CAE) should decline the task of determining the appropriate bonus formula for the incentive plan. However, the CAE should be involved in researching and benchmarking incentive plans, recommending monitoring procedures, and determining how to document the support for amounts paid.

Step-by-step explanation:

The CAE (Chief Audit Executive) should decline task b) of determining the appropriate bonus formula for inclusion in the plan. This is because designing an incentive plan falls within the purview of the COO and the sales department. As the internal audit function, the CAE's role is to provide independent and objective assurance and consulting services to assist the organization in achieving its objectives.

However, the CAE should be involved in tasks a), c), and d). Researching and benchmarking incentive plans provided by other companies in the industry (a) allows the CAE to gather valuable information to assess the reasonableness and effectiveness of the proposed plan. Recommending monitoring procedures (c) ensures that appropriate amounts are paid under the plan and helps mitigate the risk of fraudulent activities. Determining how to best document the support for amounts paid (d) helps establish a sufficient audit trail for future accountability and review purposes.