Certified Internal Auditor (CIA) Part 2: Practice of Internal Auditing — Question 15

Which of the following events would most likely cause the chief audit executive to consider changing the current year's audit plan?
1. The government announced that new regulatory requirements will be introduced in the coming years which may significantly impact the organization's primary product.
2. A major competitor unexpectedly introduced a new model at a lower price point to compete with the organization's market leading product.
3. The organization announced a new joint venture with a long time corporate partner to introduce a new product with development costs and sales beginning next fiscal year.
4. An equal joint venture partner filed a lawsuit against the organization and requested that the court issue an immediate suspension of future product shipments.

Answer options

• A. 1 and 2 only
• B. 1 and 3 only
• C. 2 and 4 only
• D. 3 and 4 only

Correct answer: C

Explanation

The correct answer is C, as the introduction of a new model by a competitor (2) creates immediate market pressure, and the lawsuit filed by a joint venture partner (4) poses significant legal risks that could disrupt operations. Options A and B do not include both of these critical events, while option D focuses on the joint venture without addressing the competitive threat.