The chief audit executive (CAE) annually develops a budget and resource plan and submits it to the board for approval. This action best fulfills which of the following responsibilities of the CAE?

Question

Options

• AThe responsibility to maintain organizational independence.
• BThe responsibility to perform engagements with due professional care.
• CThe responsibility to communicate corrective action plans to the board.
• DThe responsibility to define the purpose of the internal audit activity.

• A
  17% (6)
• B
  72% (26)
• C
  3% (1)
• D
  8% (3)

Explanation

Developing an annual budget and resource plan ensures that internal audit has the personnel, tools, and funding required to conduct engagements competently - this is the operational foundation of due professional care, since auditors cannot apply requisite skill and diligence without adequate resources. Option B is correct because resource adequacy is a prerequisite for professional performance, and the CAE fulfills this by securing board-approved funding.

Why the distractors are wrong:

• A (Organizational independence) - Independence relates to the CAE's reporting structure and freedom from management interference in audit scope/results, not the budget cycle itself.
• C (Corrective action plans) - This refers to communicating management's planned responses to audit findings, a separate reporting responsibility, not resource planning.
• D (Define the purpose) - Defining the purpose of internal audit belongs to the audit charter, a foundational document - not the annual budget process.

Memory tip: Think "no resources = no care" - due professional care is impossible without sufficient staff, skills, and budget, so the CAE securing board approval for resources is how they guarantee professional-quality engagements can actually happen.

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