Certified Internal Auditor (CIA) Part 2: Practice of Internal Auditing — Question 122

Which of the following would present the most critical external risk to an organization?

Answer options

• A. The organization experiences a merger, and the management team is reorganized and redistributed globally.
• B. The organization launches a product into new global markets.
• C. After minimal testing, the organization implements a new system to replace a legacy system.
• D. Regulators announce broad legislative reforms applicable to the industry within which the organization operates.

Correct answer: D

Explanation

The correct answer, D, highlights the impact of regulatory changes, which can significantly affect organizational operations and compliance. Options A and B present internal or market challenges that, while important, are not as critical as regulatory risks. Option C involves internal system changes that, although risky, do not pose the same level of external threat as legislative reforms.