Final answer:
The chief audit executive must consider the strategic plan in developing the annual audit plan to ensure alignment with organizational objectives, identify emerging risks, and provide assurance that risk management and controls are effective in achieving company goals.
Step-by-step explanation:
The reasons for the chief audit executive to consider the strategic plan in developing the annual audit plan are multiple and significant. Firstly, alignment with the company's strategic objectives ensures that the internal audit activities are relevant and add value to the organization by focusing on areas of highest risk and potential impact. Secondly, considering the strategic plan allows for the identification of new or emerging risks that could affect the company's ability to achieve its goals and necessitate adjustments to the audit plan to address them. Thirdly, it enables the internal audit to provide assurance to management and the board that risk management, control, and governance processes are effective in the context of the organization's strategy. The strategic plan reflects the company's long-term vision and priorities, allowing the audit to remain proactive and strategic rather than merely reactive. Understanding the company's strategy helps the audit team to prioritize audit work, allocate resources effectively, and align its efforts with the broader objectives of the company.
The chief audit executive considers the strategic plan in developing the annual audit plan for several reasons:
Alignment with Organizational Goals: The strategic plan provides a roadmap for achieving the organization's long-term objectives. By considering the strategic plan, the chief audit executive can ensure that the annual audit plan aligns with these goals and focuses on areas critical to the organization's success.
Identification of Risks: The strategic plan helps identify potential risks and challenges that the organization may face. By incorporating the strategic plan into the annual audit plan, the chief audit executive can prioritize audits that address these risks and provide assurance to management and stakeholders.
Resource Allocation: The strategic plan outlines the resources required to achieve the organization's strategic objectives. By considering the strategic plan, the chief audit executive can allocate audit resources effectively, aligning them with the areas of highest risk or strategic importance.