In an assurance engagement focused on the adequacy of organization wide risk management practices, which of the following best describes a primary area of interest for the engagement?

In an assurance engagement focused on the adequacy of organization wide risk management practices, which of the following best describes a primary area of interest for the engagement?
A . The effectiveness of process-level and transaction-level controls.
B . Conflicts of interest within the organizational structure of the senior management.
C . The alignment of management decisions with the level of risk the organization is willing to accept.
D . The actions of upper management in response to the internal audit Atchley’s reporting

Answer: C

Explanation:

Understanding the Engagement Scope: The primary area of interest in an assurance engagement focused on the adequacy of organization-wide risk management practices is to ensure that risk management is effectively integrated into the organization’s decision-making processes. This involves evaluating whether management decisions are aligned with the organization’s risk appetite, which is the amount of risk the organization is willing to accept in pursuit of its objectives. Key Considerations:

Effectiveness of Risk Management Framework: Ensuring that the risk management framework is robust and effectively implemented across the organization.

Risk Appetite Alignment: Assessing if the decisions made by management are within the boundaries set by the organization’s risk appetite statement.

Strategic Objectives: Evaluating if the risk management practices support the achievement of the organization’s strategic objectives.

IIA Standards: According to the IIA’s International Standards for the Professional Practice of Internal Auditing, internal auditors must evaluate the effectiveness and contribute to the improvement of risk management processes (Standard 2120 – Risk Management).

Reference: The alignment of management decisions with the level of risk the organization is willing to accept ensures that the organization does not take on more risk than it is prepared to handle, thereby protecting its assets and ensuring long-term sustainability.

Effective risk management practices help in identifying, assessing, and mitigating risks, which is crucial for the overall governance and operational effectiveness of the organization