Which factor indicates the need for an internal audit?

An internal audit is often required when there are issues or potential weaknesses in the organization's processes and controls. The correct response identifies a lack of concern or critical review of the internal control system by management as a reason for needing an internal audit.

When management is satisfied with the internal control system, it may indicate a complacency that could potentially overlook issues or areas for improvement. Internal audits can serve as an objective assessment that challenges this complacency, ensuring that controls are not only functioning effectively but are also continuously updated to respond to changing conditions and risks.

The other factors presented in the choices, such as problems with the internal control system, unexplained events, and cost considerations, clearly highlight issues or risks within the organization, creating a pressing need for an internal audit. However, management's satisfaction—while it may seem positive—can mask underlying issues and create a false sense of security, underscoring the importance of independent evaluation through an internal audit to maintain integrity and effectiveness in operations.