Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 29

An organization with global headquarters in the United States has subsidiaries in eight other nations. If the organization operates with an ethnocentric attitude, which of the following statements is true?

Answer options

• A. Standards used for evaluation and control are determined at local subsidiaries, not set by headquarters.
• B. Orders, commands, and advice are sent to the subsidiaries from headquarters.
• C. People of local nationality are developed for the best positions within their own country.
• D. There is a significant amount of collaboration between headquarters and subsidiaries.

Correct answer: D

Explanation

The correct answer is D because an ethnocentric approach typically leads to a centralized decision-making process, where the headquarters retains significant control and authority over subsidiaries. Options A, B, and C suggest a more decentralized or locally focused approach, which contradicts the characteristics of an ethnocentric mindset.