The most critical factor in determining which engagements should be included in the annual internal audit plan is the organization's annual risk management strategy. This strategy identifies the key risks facing the organization and ensures that the internal audit plan aligns with the areas of highest risk. This prioritization helps ensure that internal audit resources are focused on areas that could have the most significant impact on the organization. Reference:
"Internal Auditing: Assurance & Advisory Services" (The Institute of Internal Auditors)
"Risk-Based Internal Auditing" (IIA Practice Guide)