IIA-CIA-PART2 · Question #243
An audit observation states the following: "Despite the rules of the organization there is no approved credit risk management policy in the subsidiary. The subsidiary is concluding contacts with…
The correct answer is B. Effect and criteria. The observation in question includes the condition ("no approved credit risk management policy" and "17 out of 50 contacts showed clients with a poor credit history") and the cause (the subsidiary concluding contacts with high-risk clients). However, it lacks the effect, which…
Question
An audit observation states the following:
"Despite the rules of the organization there is no approved credit risk management policy in the subsidiary. The subsidiary is concluding contacts with clients who have very high credit ratings. The internal audit team tested 50 contacts and 17 showed clients with a poor credit history" Which of the following components are missing in the observation?
Options
- ACause and effect.
- BEffect and criteria
- CCondition and cause
- DCriteria and condition.
How the community answered
(23 responses)- A9% (2)
- B74% (17)
- C13% (3)
- D4% (1)
Explanation
The observation in question includes the condition ("no approved credit risk management policy" and "17 out of 50 contacts showed clients with a poor credit history") and the cause (the subsidiary concluding contacts with high-risk clients). However, it lacks the effect, which should explain the potential or actual impact of this deficiency on the organization (e.g., financial losses, increased credit risk). Additionally, it is missing the criteria, which should reference the specific rules or policies that are not being followed (e.g., the organization's credit risk management policy requirements). Including these components would provide a complete and actionable
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