Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 14

Which of the following conditions could lead an organization to enter into a new business through internal development rather than through acquisition?

Answer options

• A. It is expected that there will be slow retaliation from incumbents.
• B. The acquiring organization has information that the selling organization is weak.
• C. The number of bidders to acquire the organization for sale is low.
• D. The condition of the economy is poor.

Correct answer: A

Explanation

The correct answer, A, suggests that if retaliation from competitors is expected to be slow, a company may feel more secure in developing internally. Options B and C indicate reasons related to the weaknesses of the selling organization or low competition, which do not directly support the choice of internal development. Option D addresses the economy's condition, but a poor economy could also hinder internal development efforts.