Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 155

Which of the following descriptions of the internal control system are indicators that risks are managed effectively?
1. Existing controls promote compliance with applicable laws and regulations.
2. The control environment is designed to address all identified risks to the organization.
3. Key controls for significant risks to the organization remain consistent over time.
4. Monitoring systems are in place to alert management to unexpected events.

Answer options

• A. 1 and 3.
• B. 1 and 4.
• C. 2 and 3.
• D. 2 and 4.

Correct answer: B

Explanation

Option B is correct because both statements 1 and 4 highlight the presence of controls that ensure legal compliance and monitoring of unexpected events, which are crucial for effective risk management. Options A, C, and D include elements that may not directly relate to how effectively risks are managed in the context of compliance and monitoring.