Learn the most appropriate action for the Chief Audit Executive to take when local management fails to remediate a serious environmental violation in this practice question from the IIA-CIA-Part2 certification exam. Understand the key considerations and thought process to determine the best next step.
Table of Contents
Question
During an assurance engagement, it was discovered that cooling water from production facilities was being pumped to a local lake without being filtered. Local management acknowledged the environmental violation, claimed it was an accident, and committed to an immediate response. A few weeks later, the chief audit executive (CAE) received an anonymous call and learned that nothing had changed at the production site. Which of the following is the most appropriate next step for the CAE to take?
A. Ensure that a follow-up audit engagement is included in the next annual internal audit plan.
B. Escalate the issue to the board, as it is an intolerable environmental risk.
C. Request local management to demonstrate outcomes of corrective actions.
D. Investigate whether it is possible to identify the anonymous whistleblower for more questioning.
Answer
The most appropriate next step for the Chief Audit Executive (CAE) is:
B. Escalate the issue to the board, as it is an intolerable environmental risk.
Explanation
This environmental violation of pumping unfiltered wastewater into a local lake poses a severe and unacceptable risk to the environment and the organization’s reputation. Local management initially acknowledged the issue and committed to immediate corrective action. However, the anonymous tip reveals that no changes were actually made at the production site several weeks later.
At this point, simple assurances from local management are insufficient, as they have already failed to follow through on their commitment. Waiting for the next audit cycle (Option A) allows this critical issue to persist for too long. While the CAE could request evidence of completed corrective actions from local management (Option C), their credibility on this matter is diminished. Attempting to identify the anonymous whistleblower (Option D) is unethical and counterproductive, as it may discourage future whistleblowing and does not address the underlying issue.
Escalating this serious, unresolved violation to the board of directors (Option B) is the most appropriate action. The board needs to be made aware of this critical risk and management’s failure to remediate it promptly. This allows the board to direct a swift resolution and consider the implications for the responsible management. Involving the board conveys the seriousness and urgency of the matter, and leverages their authority to ensure a prompt and effective response.
As a CAE, it is crucial to recognize risks that are intolerable to the organization and take decisive action, even if it means escalating over management when they have not demonstrated sufficient urgency in addressing critical issues. Promptly informing the board enables appropriate oversight and sends a clear message about the organization’s commitment to environmental responsibility and ethical conduct.
IIA-CIA-Part2 certification exam assessment practice question and answer (Q&A) dump including multiple choice questions (MCQ) and objective type questions, with detail explanation and reference available free, helpful to pass the IIA-CIA-Part2 exam and earn IIA-CIA-Part2 certification.