After management has implemented an action plan to improve controls, the most appropriate follow-up action for the auditor is to perform retesting. Retesting involves verifying that the new procedures are effective in addressing the control deficiencies identified during the initial audit.
Detailed Explanation:
IIA Standard 2500 - Monitoring Progress:
This standard requires the internal audit activity to monitor and ensure that management actions have been implemented and are working as intended. Retesting is a critical component of this process because it confirms that the new controls effectively mitigate the risks.
Importance of Retesting:
Retesting allows the auditor to verify that the specific control activities, which were previously found to be deficient, have been corrected. This hands-on approach provides direct evidence of the effectiveness of the new procedures.
IIA Practice Advisory 2500-1:
The advisory emphasizes the need for follow-up activities to include retesting when necessary to confirm that management's actions have resolved the issues identified.
Why Not Other Options?
Option A (Conduct another audit): Conducting a completely new audit might be excessive; follow-up and retesting are sufficient to confirm the effectiveness of the corrective actions.
Option B (Ensure procedures are documented): Documentation is important, but it does not confirm that the procedures are actually effective.
Option D (Analyze procedures and report to management): Analysis is useful, but retesting provides direct verification of effectiveness.
Conclusion: Option C is correct because retesting confirms that the new procedures effectively address the previously identified deficiencies, ensuring that the risks have been mitigated as intended, in line with IIA guidance.